There are several problems associated with forecasting exchange rates using single-equation econometric models, including:
A) they explain the value of the exchange rate in terms of other variables, without explaining how these other variables are determined
B) they are very expensive models to run
C) they may be conditional on the future value of the explanatory variables
D) they explain the value of the exchange rate in terms of other variables, without explaining how these other variables are determined AND they may be conditional on the future value of the explanatory variables

Question

Quizplus · Accepted Answer

Single-equation econometric models for forecasting exchange rates often face criticism because they explain the exchange rate in terms of other variables without addressing how those variables themselves are determined. Additionally, these models may rely on future values of explanatory variables, making their forecasts conditional and potentially less reliable.

There Are Several Problems Associated with Forecasting Exchange Rates Using