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This paper develops a model for the forward and spot exchange rate which allows for the presence of a Markov switching risk premium in the forward market and considers the issue of testing the unbiased forward exchange rate (UFER) hypothesis. Using US/UK data, it is shown that the UFER...
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The U.S. CPI is based on the Laspeyres price index, an index type that has an upward "substitution bias." Thus, the CPI … tends to overstate increases in the cost of living. To address this bias, the Advisory Commission to Study the Consumer … preferences. Under more realistic non-homothetic preferences, expenditure shares vary with income and, thus, "income bias" is …
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