An economist is building a 10-year forecast model for the exchange rate between two countries. Historical data over the last 30 years shows that the home currency has, on average, actually depreciated by 2% annually against the foreign currency. Given the empirically observed long-run relationship between market expectations and actual currency movements, what is the most logical assumption for the economist to incorporate into their model regarding the market's expectation of depreciation?
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An economist is building a 10-year forecast model for the exchange rate between two countries. Historical data over the last 30 years shows that the home currency has, on average, actually depreciated by 2% annually against the foreign currency. Given the empirically observed long-run relationship between market expectations and actual currency movements, what is the most logical assumption for the economist to incorporate into their model regarding the market's expectation of depreciation?
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An economist is building a 10-year forecast model for the exchange rate between two countries. Historical data over the last 30 years shows that the home currency has, on average, actually depreciated by 2% annually against the foreign currency. Given the empirically observed long-run relationship between market expectations and actual currency movements, what is the most logical assumption for the economist to incorporate into their model regarding the market's expectation of depreciation?
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