Direkt zum Inhalt

Exchange Rate Forecasts and Expected Fundamentals

Aufsätze referiert extern - Web of Science

Christian D. Dick, Ronald MacDonald, Lukas Menkhoff

In: Journal of International Money and Finance 53 (2015), S. 235-256

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.

Lukas Menkhoff

Head of Department in the International Economics Department



JEL-Classification: F31;F37;E44
Keywords: Exchange rate determination; Individual expectations; Macroeconomic fundamentals
DOI:
http://dx.doi.org/10.1016/j.jimonfin.2015.02.002

keyboard_arrow_up