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[position in research by subject]
"Evaluating the Information Content and Money Making
Ability of Forecasts
from Exchange Rate Equations," May 1999, unpublished.
pfd file (95KB).
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.
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