The Term Structure of Forward Exchange Rates and the Forecastability of Spot Exchange Rates: Correcting the Errors

Richard H. Clarida & Mark P. Taylor
This paper revisits one of the oldest questions in international finance: does the forward exchange rate contain useful information about of the future path of the spot exchange rate? We present a theoretical framework and provide evidence that challenges the common view (Mussa (1979); Dornbusch (1980); Frenkel (1981); Cumby-Obstfeld (1984) that forward premia contain little information regarding subsequent changes in the spot exchange rate. Using weekly dollar-DM and dollar-sterling data on spot exchange rates and...
This data repository is not currently reporting usage information. For information on how your repository can submit usage information, please see our documentation.