• 1 Introduction
  • 2 A Model with Unknown Parameters
  • 2.1 Basic Framework with Constant Parameters
  • 2.2 Time-varying and Unknown Parameters
  • 2.3 Exchange Rates and Fundamentals
  • 2.4 Expectation of Parameters
  • 2.5 Derivative of Exchange Rate with respect to Funda-mentals: Intuition
  • 3 Numerical Analysis
  • 3.1 Calibration
  • 3.2 Results
  • 3.3 Sensitivity to Process of Structural Parameters
  • 3.4 Other Sensitivity Analysis
  • 4 Time-Varying Coefficients and Forecasting Performance
  • 4.1 Out-of-Sample Forecasting in the Data
  • 4.2 The Eect of Time-Varying Parameters
  • 5 Conclusion
  • Appendix
  • References