What currency forecasting technique links exchange rates to macroeconomic variables such as money supply and inflation?

Question

Quizplus · Accepted Answer

This technique is called fundamental analysis, which involves analyzing macroeconomic variables such as money supply and inflation to estimate future movements in exchange rates. Technical analysis, on the other hand, focuses on analyzing past market data to identify patterns and trends. Exchange rate forecasting is a general term for any method used to predict future exchange rate movements. Mean absolute error is a measure used to evaluate the accuracy of a forecast, but it is not itself a forecasting technique.

What Currency Forecasting Technique Links Exchange Rates to Macroeconomic Variables