... exchange rate The expression for PPP can then be written (in log-form) as vt = pt − pt* , (1) where pt is the log of the domestic price, pt* is the log of the foreign price, and vt is the log of the ... proxy for the annual interest rate, we therefore need to multiply the quarterly interest rate by four Hence, if we had used an annual interest rate, the coefficient for the interest rate difference ... is the forecast of (the log of) the actual exchange rate (and not its change) that are compared Following Meese and Rogoff (1983), we perform an out -of- sample forecasting exercise comparing the...