Question: Forecasting the Argentine Peso. As illustrated in the graph, the Argentine peso moved from its fixed exchange rate of Ps1.00/$ to over Ps2.00/$ in a matter of days in early January 2002. After a brief period of high volatility, the peso's value appeared to settle down to a range varying between 2.0 and 2.5 pesos per dollar. If you were forecasting the Argentine peso further into the future, how would you use the information in the graph-the value of the peso freely floating in the weeks following devaluation-to forecast its future value?
