Which of the following issues are difficulties for the fundamental approach to exchange rate forecasting?
A)One has to forecast a set of independent variables to forecast the exchange rates.Forecasting the former will certainly be subject to errors and may not be necessarily easier than forecasting the latter.
B)The parameter values,that is the α's and β's,that are estimated using historical data may change over time because of changes in government policies and/or the underlying structure of the economy.Either difficulty can diminish the accuracy of forecasts even if the model is correct.
C)The model itself can be wrong.
D)none of the options

Question

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The Answer of Which of the following issues are difficulties for the fundamental approach to exchange rate forecasting?
A)One has to forecast a set of independent variables to forecast the exchange rates.Forecasting the former will certainly be subject to errors and may not be necessarily easier than forecasting the latter.
B)The parameter values,that is the α's and β's,that are estimated using historical data may change over time because of changes in government policies and/or the underlying structure of the economy.Either difficulty can diminish the accuracy of forecasts even if the model is correct.
C)The model itself can be wrong.
D)none of the options

Which of the Following Issues Are Difficulties for the Fundamental