Clements, Kenneth W.; Lan, Yihui - In: Journal of International Money and Finance 29 (2010) 7, pp. 1424-1437
Building on purchasing power parity theory, this paper proposes a new approach to forecasting exchange rates using the Big Mac data from The Economist magazine. Our approach is attractive in three aspects. Firstly, it uses easily-available Big Mac prices as input. These prices avoid several...