This paper applies the analytical framework of the monetary approach to exchange rate determination to the analysis of the Dollar/Pound exchange rate during the first part of the 1920's. The analysis uses monthly data up to the return of Britain to gold in 1925. The equilibrium exchange rate is...

This paper examines the efficiency of the forward yen/dollar market using micro survey data. We first argue that the conventional tests of efficiency (unbiasedness) of the forward rate or of the survey forecasts do not correspond directly to the zero-profit condition. Instead, we use the survey...

Separate literatures study violations of uncovered interest parity (UIP) using regression-based and portfolio-based methods. We propose a decomposition of these violations into a cross-currency, a between-time-and-currency, and a cross-time component that allows us to analytically relate...

This paper evaluates out-of-sample exchange rate predictability of Taylor rule models, where the central bank sets the interest rate in response to inflation and either the output or the unemployment gap, for the euro/dollar exchange rate with real-time data before, during, and after the...

We compare the out-of-sample forecasting performance of univariate homoskedastic, GARCH, autoregressive and nonparametric models for conditional variances, using five bilateral weekly exchange rates for the dollar, 1973-1989. For a one week horizon, GARCH models tend to make slightly more...

This paper studies how the monetary policy regime affects the relative importance of nominal exchange rates and inflation rates in shaping the response of real exchange rates to shocks. We document two facts about inflation-targeting countries. First, the current real exchange rate predicts...

Under uncovered interest parity (UIP), the size of the effect on the real exchange rate of an anticipated change in real interest rate differentials is invariant to the horizon at which the change is expected. Empirical evidence using US, euro area and UK data points to a substantial deviation...

We present theory and evidence that challenges the view that forward premia contain little information regarding subsequent spot rate movements. Using weekly dollar-mark and dollar sterling data, we find that spot and forward exchange rates together are well represented by a vector error...