Standard economic models hold that exchange rates are influenced by fundamental variables such as relative money supplies, outputs, inflation rates and interest rates. Nonetheless, it has been well documented that such variables little help predict changes in floating exchange rates -- that is,...

We propose two new procedures for comparing the mean squared prediction error (MSPE) of a benchmark model to the MSPEs of a small set of alternative models that nest the benchmark. Our procedures compare the benchmark to all the alternative models simultaneously rather than sequentially, and do...

We study the dynamics of price indices for major U.S. cities. Using panel econometric methods, we find that relative price levels among cities mean revert, but at a surprisingly slow rate. In a panel of 15 cities from 1918 to 1995, we estimate the half life of convergence to be approximately 9...

We study a cross section of carry-trade-generated currency excess returns in terms of their exposure to global fundamental macroeconomic risk. The cross-country high-minuslow (HML) conditional skewness of the unemployment gap—our measure of global macroeconomic uncertainty—is a factor that...