Exchange Rate Predictions with UIP and PPP Assignment | Essay Help Services

I need literature review to be written. The research questions is “Given the adoption of free floating scheme from most countries, can we support the argument of Meese and Rogoff?” Please use around 10 sources to write the review. Please find the full instructions attached.

 Exchange Rate Predictions with UIP and PPP

Exchange rate forecasting is one of the most fascinating and academically vivid research areas. The large number of currency crises during the past years have stimulated and challenged the existing academic literature. Numerous researchers tried to answer the generic question “Can exchange rates be predicted and under what assumptions?” This question led to a continuous effort for identification of deterministic relationships, challenging the most prominent macroeconomic models. In a very influential paper, Meese and Rogoff (1983) claim that structural models cannot outperform the random walk model, giving rise to the disconnect puzzle of exchange rates from fundamentals.

The most common macroeconomic models regarding exchange rate forecasting are Interest Rate Parity and Purchasing Power Parity. In those two cases, the underlying theory assumes that there are no arbitrage conditions. The literature has provided mixed signals regarding the performance of the candidate predictors. Given the adoption of free floating scheme from most countries, can we support the argument of Meese and Rogoff?

Examples of Data Sources – Federal Reserve of Saint Louis – Eikon – IMF – OECD

References

1. Meese, R.A. & Rogoff, K., 1983. Empirical exchange rate models of the seventies: Do they fit out of sample?. Journal of International Economics, 14(1), pp.3-24.
2. Mark, N.C. & Sul, D., 2001. Nominal exchange rates & monetary fundamentals: evidence from a small post-Bretton Woods panel. Journal of International Economics, 53(1), pp.29-52.
3. Beckmann, J. & Schüssler, R., 2016. Forecasting exchange rates under model & parameter uncertainty. Journal of International Money & Finance, 60(3), pp.267-288.

NOTE FOR YOU:

The research questions is “Given the adoption of free floating scheme from most countries, can we support the argument of Meese and Rogoff?”

Please use around 10 sources to write the review.