Mei Qiu

Citation

Thesis Title
The predictive power of cumulative exchange rate deviations and its applications

Read article at Massey Research Online:

Dr Qiu’s research examined the predictive power of cumulative exchange rate movements and the application of this predictive power. Her research showed that the direction of future exchange rate movement can be predicted by cumulative exchange rate deviation from Purchasing Power Parity (PPP). The research also found that the main driving force of corrections to cumulative exchange rate deviations from PPP is the reversion of historical exchange rate movement, and that PPP complements this correction process. These results explain the frequent failure of current theory to predict short-run exchange rate movements. The alternative proposed by Dr Qiu has enriched current knowledge of exchange rate dynamics. The predictability of directional exchange rate movement was then applied to form strategies for more efficient international asset allocation and foreign exchange transaction risk management. These successful applications indicate that the predictive power of cumulative exchange rate deviations has significant economic value in practice.

Supervisors
Associate Professor John Pinfold
Professor Lawrence Rose