Colombian paper probes predictive power of expectations

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A working paper, published by the Central Bank of Colombia today (October 2), finds that in Colombia short-run expectations may be better predictors of future exchange rate revaluations – a rise in the valuation of the currency – than economic models.

Exchange rate revaluations in the country between October 2003 and August 2012 were generally followed by expectations of further revaluation a month later, and by devaluations after a year. In both cases, expectations were stabilising, the authors

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