A Consumption-Based Approach to Exchange Rate Predictability

Borradores de Economia
Number: 
857
Published: 
Classification JEL: 
C5, F31, F47, G15
Keywords: 
Human capital agglomeration, Social returns, Private returns, Externalities, Uncertainty, Fiscal policy
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This paper provides evidence of short-run predictability for the real exchange rate by performing out-of-sample tests of a forecasting equation which is derived from a consumption-based asset pricing model. In this model, the real exchange rate is predict