Question

Which of the following issues are difficulties for the fundamental approach to exchange rate forecasting? The model itself can be wrong. The parameter values, that is the a's and B's, that are estimated using historical data may change over time because of changes in government policies and/or the underlying structure of the economy. Either difficulty can diminish the accuracy of forecasts even if the model is correct. One has to forecast a set of independent variables to forecast the exchange rates. Forecasting the former will certainly be subject to errors and may not be necessarily easier than forecasting the latter. none of the options

Answer 1

co Fundamental approach to exchage Rate forecasting? Any [c] - one has to forecast a set of independent variables to force cast the exchange rates. Forecasting the fomer will certainly be subject to erros and may not be necessarily easser that for casting the latter.