Recently, A kind of portfolio balance model is empirically tested on the Canadian dollar - US dollar exchange rate over the floating exchange rate period by Cushman (2007). It has been shown that the exchange rate is important in the adjustment to equilibrium, from the analysis of the model coefficients. A simplified version of the empirical model is alleged to be able to beat a random walk at someout-of-sample forecast horizons. Chaisrisawatsuk et al. (2004) employ the portfo