Exchange rate forecasting models and the financial crisis

The literature on exchange rate forecasting and the out of sample evaluation has basically started with the work by Meese and Rogoff (1983). They were the first to show that the basic random walk model outperforms other economic models of exchange rate in terms of forecasting.

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The Big Mac Index and Real Exchange Rates

I discussed in a previous post about the shortcomings of the Big Mac Index and how these issues might lead to misuses of this index. As one would expect, there is a thin academic literature which discusses or uses the Big Mac Index, however the studies that exist make some interesting points which deserve to be mentioned.

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