Using the following data on spot exchange rate of Poland against the U.S. dollar and the annual inflation rates of these two countries, forecast the outright values of 6 and 12 months ahead of the Polish currency. Draw on the forecasting theories or parities that are the subject of Chapter 6 of the book, and the other discussions we have had in this regard (e.g., lecture notes AMP06 and Amp07). Use the more accurate approach. Polish currency is called Zloty (= PLN) Spot rate PLN 4.26/USD US inflation rate 2.2 percent Polish inflation rate 4.4 percent Review the following questions.

1. The outright forecast for 6 months is:

2. The outright forecast for 12 months is:

3. The theory that you are using is called:

Purchasing power parity

Interest rate parity

Fisher effect

International fisher effect

None of the answers in this group apply to my work.

4. This theory holds very well in the:

Short-run

Long-run

Chaotic periods only

None of the answers in this group are correct.

5. Based on this theory, the country that has a higher rate of inflation should expect a rise in the value of its currency.

I agree

I disagree

You really cannot tell

Never heard of such a thing!

None of the answers in this group are correct