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A model of medium term exchange rate forecast in an open economy. The case of the mexican peso

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  • Mosqueda Almanza Rubén

    (Tecnológico de Monterrey)

  • Guillén Jorge

    (Universidad ESAN)

Abstract

Keynes (1930) and Samuelson (1965) proposals open the possibility of matching predictability and efficiency, as evidenced by the seminal study by Fisher (1930). Recent findings suggest that the foreign exchange market gradually incorporates relevant information allowing the formation of prices in a rational manner but not randomly. Models of exchange rate by term based on asset valuation suggest that the inclusion of risk in the spot rate increases the degree of predictability. The results show that after incorporating an accurate measure of risk, predictability of medium term foreign exchange rate increases.

Suggested Citation

  • Mosqueda Almanza Rubén & Guillén Jorge, 2014. "A model of medium term exchange rate forecast in an open economy. The case of the mexican peso," Contaduría y Administración, Accounting and Management, vol. 59(2), pages 197-225, abril-jun.
    • Handle: RePEc:nax:conyad:v:59:y:2014:i:2:p:197-225
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    References listed on IDEAS

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    More about this item

    Keywords

    exchange rate forecast; forex market; asset valuation; risk premium;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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