The real exchange rate - real interest rate (RERI) relationship is central to most open economy macroeconomic models. However, empirical support for the relationship, especially when cointegrationbased methods are used, is rather weak. In this paper we reinvestigate the RERI relationship using...

We study in this paper a forecasting model for long-term rates based both on the arbitrage-free hypothesis and the agents' rationality. The long-term rate is expressed as an average of expected short-term rates, which are modelized according to three models: two univariate models (with...

This study explores a new modelling approach that bridges the gap between multilateral country-level data and the bilateral-model based, goods-market specific purchasing power parity (PPP) hypothesis. Under this approach, PPP is embedded in latent common factors, extractable from a large set of...