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http://hdl.handle.net/10419/51358
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| Title: | | Individual exchange rate forecasts and expected fundamentals  |
| Authors: | | Dick, Christian D. MacDonald, Ronald Menkhoff, Lukas |
| Issue Date: | | 2011 |
| Series/Report no.: | | ZEW Discussion Papers 11-062 |
| Abstract: | | This paper suggests that exchange rates are related to economic fundamentals over medium-term horizons, such as a month or longer. We find from a large panel of individual professionals' forecasts that good exchange rate forecasts benefit from the proper understanding of fundamentals, specifically good interest rate forecasts. This relation is robust to individual fixed effects and further controls. Reassuringly, this relation is stronger during obvious fundamental misalignment. This occurs when exchange rates substantially deviate from their PPP values, when interest rate differentials are high and when exchange rates are less influenced by strong momentum. |
| Subjects: | | Exchange Rate Determination Individual Expectations Macroeconomic Fundamentals |
| JEL: | | F31 F37 E44 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des ZEW ZEW Discussion Papers
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