Nominal exchange rates can be forecast on ‘back of a napkin’ - ECB paper

ECB headquarters
Annabel Jeffery

A working paper published by the European Central Bank argues that the foreign exchange markets of advanced countries with flexible regimes show two statistical regularities.

In Exchange rate forecasting on a napkin, Michele Ca’ Zorzi and Michał Rubaszek examine data on the nominal exchange rates and inflation in 11 major economies, including the eurozone, the US and the UK, from 1975 to 2017. They use this data to calculate the bilateral real exchange rates between each pair of economies in

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