Exchange rate forecasts and expected fundamentals

Christian Dick, Ronald MacDonald and Lukas Menkhoff

No 1974, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Using a large panel of individual professionals' forecasts, this paper demonstrates that good exchange rate forecasts are related to a proper understanding of fundamentals, specifically good interest rate forecasts. This relationship is robust to individual fixed effects and further controls. Reassuringly, the relationship is stronger during phases when the impact from fundamentals is more obvious, e.g., when exchange rates substantially deviate from their PPP values. Finally, forecasters largely agree that an interest rate increase relates to a currency appreciation, but only good forecasters get expected interest rates right.

Keywords: Exchange Rate Determination; Individual Expectations; Macroeconomic Fundamentals (search for similar items in EconPapers)
JEL-codes: E44 F31 F37 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/103982/1/805020594.pdf (application/pdf)

Related works:
Journal Article: Exchange rate forecasts and expected fundamentals (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1974

Access Statistics for this paper

More papers in Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().