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The main objective of this paper is to re-investigates the exchange rates predictability puzzle using monetary model. It is hypothesised that the performance of exchange rate predictability is better off in countries with monetary instability. The authors employ bootstrap technique as proposed by Kilian (1999) to alleviate statistical inference intricacies inherit in the long horizon forecasting for three different monetary models (flexible price, sticky price and relative price) for selected developing economies. The empirical result shows the superiority of sticky price model along with the evidence of exchange rate predictability for high inflation economies.
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