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International Financial Management

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter9: Forecasting Exchange Rates

Section: Chapter Questions

Problem 19QA

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Question

The following regression model was estimated to forecast the value of the Malaysian ringgit (MYR):
MYR Fao+a+INC+a₂INF+U
where MYR is the quarterly change in the ringgit, INF is the previous quarterly percentage change in the inflation differential, and INC is the predious quarterly percentage change in the income growth differential.
Regression results indicato coeficients
ao-0.004;
a₁-0.6; and az -0.5. The most recent quarterly percentage change in the income differential is -1%, while the most recent quarterly percentage
change in the inflation differential is -7%. Using this information, the forecast for the percentage change in the ringgit is % (1 decimal place please; note % is already given, so if you find an answer of .055, you
will need to enter 5.5 for the correct answer because .055-5.5%)

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