On Fundamentals and Exchange Rates: A Casselian Perspective
The Review of Economics and Statistics
1997
Using an expanded version of the purchasing-power-parity condition we construct simultaneous equation models for three key exchange rates which incorporate meaningful long-run equilibrium relationships and complex short-run dynamics. We show that fully dynamic out-of-sample forecasts from these models are capable of significantly outperforming those of a random walk model over horizons as short as 3 months, and that they are also more accurate than the vast majority of professional forecasts.
- DOI
- 10.1162/003465397557060
- Volume
- 79 (4)
- Pages
- 655-664
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref