Exchange Rate Predictability Fact or Fiction?

Jackson, K. and Magkonis, G. 2024. Exchange Rate Predictability Fact or Fiction? Journal of International Money and Finance. 142 103026. https://doi.org/10.1016/j.jimonfin.2024.103026

TitleExchange Rate Predictability Fact or Fiction?
TypeJournal article
AuthorsJackson, K. and Magkonis, G.
Abstract

The present study investigates the factors that affect the forecasting performance of several models that have been used for exchange rate prediction. We provide a quantitative survey collecting 8,413 reported forecast errors and we investigate which forecasting characteristics tend to improve forecasting ability. According to our evidence, predictions can beat random walk when certain types of models and econometric methods are used. In particular, linear specifications based on PPP outperform random walk. Furthermore, higher data frequency and longer forecasting horizon also improve forecasting performance. In this way, we identify under which conditions it is feasible to solve the `Meese-Rogoff' puzzle.

KeywordsExchange rates
forecasting performance
meta-analysis
Article number103026
JournalJournal of International Money and Finance
Journal citation142
ISSN0261-5606
1873-0639
Year2024
PublisherElsevier
Publisher's version
License
CC BY-NC-ND 4.0
File Access Level
Open (open metadata and files)
Digital Object Identifier (DOI)https://doi.org/10.1016/j.jimonfin.2024.103026
Publication dates
Published online19 Feb 2024
Published in printApr 2024

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