Charles Engel




Department of Economics

University of Wisconsin

1180 Observatory Drive 

Madison, WI 53706-1393


Phone: (608) 262-3697

FAX: (608) 262-2033

Contact me at




Wisconsin Economics Department

National Bureau of Economic Research

International Economics Workshop

Working Papers

Published Papers




Here are a couple of figures from the new working paper with Steve Pak Yeung Wu: "Exchange Rate Models are Better Than You Think, and Why They Didn't Work in the Old Days"

In the first figure, we have estimated a single-equation model for monthly changes in the exchange rate with traditional monetary policy-related variables (real interest rates and expected inflation), variables related to risk (corporate bond spread, convenience yield, changes in net external debt) and the lagged real exchange rate. Here we have cumulated the fitted values of the regression and then adjusted the average to equal the sample average. [Note these are not forecasting equations - they relate current exchange rates to current fundamentals.]

A graph of stock market

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Of course, it well known that these models did not fit in the past. Here are plots of the F-statistic for joint significance of the fundamentals and R2 for 20-year rolling samples beginning in March 1973 (and these are fit without the convenience yield, as that data was unavailable back to the start of the sample.)

A graph of a graph

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