Predicting exchange rates remains a tricky issue for economists. In spite of a theoretical consistent framework, macroeconomic models fail to beat random walk models and market expectations have not predictive power. The article addresses some problems of exchange rate macroeconomic modelling....

Using equilibrium exchange rate models (PPP, BEER and FEER), many authors have concluded that the renminbi is undervalued by 15 to 30% against the dollar, but they implicitly assume that the economy is at full-employment, a debatable hypothesis for developing economies such as China, whose...