A New Approach to Forecasting Exchange Rates

Preprint OPEN
Kenneth W Clements; Yihui Lan;
(2006)
  • Subject: Exchange-rate forecasting, Bic Mac prices, purchasing power parity, Monte Carlo simulation
    • jel: jel:F30 | jel:C53
    arxiv: Physics::Atmospheric and Oceanic Physics

Building on purchasing power parity theory, this paper proposes a new approach to forecasting exchange rates using the Big Mac data from The Economist magazine. Our approach is attractive in three aspects. Firstly, it uses easily-available Big Mac prices as input. These... View more
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