Limitations of a Fundamental Forecast Syracuse Corp. believes that future real interest rate movements will affect exchange rates, and it has applied regression analysis to historical data to assess this relationship. It will use regression coefficients derived from this analysis along with forecasted real interest rate movements to predict exchange rates in the future. Explain at least three limitations of this method.

FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698
FindFind

International Financial Management

14th Edition
Madura
Publisher: Cengage
ISBN: 9780357130698

Solutions

Chapter 9, Problem 8QA
Textbook Problem

Limitations of a Fundamental Forecast Syracuse Corp. believes that future real interest rate movements will affect exchange rates, and it has applied regression analysis to historical data to assess this relationship. It will use regression coefficients derived from this analysis along with forecasted real interest rate movements to predict exchange rates in the future. Explain at least three limitations of this method.

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