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"Evaluating the Information Content and Money Making Ability of Forecasts from Exchange Rate Equations," May 1999, unpublished.
pfd file (95KB).

Abstract

This paper evaluates the type of exchange rate equations that are part of the multicountry economtric model in Fair (1994). Two equations are analyzed---one estimated for the dollar/yen rate and one for the dollar/mark rate. The forecasts from the equations dominate forecasts from the random walk model, from a fairly general version of the monetary model, and from the use of the forward rate. The results also suggest that money may be able to be made in the forward markets using the equations.
Comments

This paper is my attempt to bring more macro into finance. The results suggest that exchange rate equations like those in the MC model dominate other equations.