Research shows that the predictive ability of economic fundamentals for exchange rates is time-varying; it may be detected in some periods and disappear in others. This paper uses bootstrap-based methods to uncover the time-specific conditioning information for predicting exchange rates....

This paper brings four new insights into the Purchasing Power Parity (PPP) debate. First, we show that a half-life PPP (HL) model is able to forecast real exchange rates better than the random walk (RW) model at both short and long-term horizons. Second, we find that this result holds if the...

This paper analyzes the role of uncertainty on both exchange rate expectations and forecast errors of professionals for four major currencies based on survey data provided by FX4casts. We consider economic policy, macroeconomic, and financial uncertainty as well as disagreement among CPI...

This paper evaluates the performance of carry trade strategies with macro fundamentals in a Markov switching dynamic factor augmented regression framework and compares the performance statistics with the benchmark model of a random walk and momentum strategy. I make simulations with the Japanese...

There is empirical evidence for a time-varying relationship between exchange rates and fundamentals. Such a relationship with time-varying coefficients can be estimated by a Kalman filter model. A Kalman filter estimates the coefficients recursively depending on the prediction error of the...

This study provides quarterly time-series estimates of the misalignment in the REER of the Renminbi (RMB). The estimation is based on a commonly used economic approach, but with a wider and more up-to-date coverage of data and a more extensive use of econometric modelling techniques. Our...