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THE RESPONSE OF FORWARD EXCHANGE RATES TO INTEREST RATE FORECASTING ERRORS |
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| Authors: | Fred R. Kaen Evangelos O. Simos George A. Hachey |
| Abstract: | This paper examines the effects of interest rate news on changes in forward foreign exchange rates. Virtually none of the errors in forecasting forward exchange rates are explained by interest rate forecasting errors. The results are consistent with a conjecture that the forward exchange rate is not an estimate of the expected spot exchange rate. |
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