Real Exchange-Rate Prediction over Long Horizons

@inproceedings{Mark1996RealEP,
  title={Real Exchange-Rate Prediction over Long Horizons},
  author={Nelson C. Mark and D Choi},
  year={1996}
}
In studying monthly real exchange rates between the U.S. and Britain, Canada, Germany, and Japan from 1961 to 1993, we ̄nd that the deviation of the log real exchange rate from its time-varying, long-run equilibrium value contains a statistically signi ̄cant predictable component at the 4-year horizon over a forecast period extending from 1985 to 1993. Fixed-e®ects regressions employing di®erentials in productivity, real interest rates, and per capita income display some predictive power but… CONTINUE READING
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