1. Predicting exchange rates in Asia: New insights on the accuracy of survey forecasts.
- Author
-
Kunze, Frederik
- Subjects
FOREIGN exchange rates ,RENMINBI ,JAPANESE yen ,FORECASTING ,TIME series analysis - Abstract
By linking measures of forecast accuracy as well as testing procedures with regard to forecast rationality this paper investigates aggregated survey forecasts with forecast horizons of 3, 12, and 24 months for the exchange rates of the Chinese yuan, the Hong Kong dollar, the Japanese yen, and the Singapore dollar vis-à-vis the US dollar and, hence, for four different currency regimes. The rationality of the exchange rate predictions is initially assessed utilizing tests for unbiasedness and efficiency which indicate that the investigated forecasts are irrational in the sense that the predictions are biased. As onemajor contribution of this paper, it is subsequently shown that these results are not consistent with an alternative, less restrictive, measure of rationality. Investigating the order of integration of the time series aswell as cointegrating relationships, this empirical evidence supports the conclusion that the majority of forecasts are in fact rational. Regarding forerunning properties of the predictions, the results are rather mediocre, with shorter term forecasts for the tightly managed USD/CNY FX regime being one exception. As one additional important and novel evaluation result, it can be concluded, that the currency regime matters for the quality of exchange rate forecasts. [ABSTRACT FROM AUTHOR]
- Published
- 2020
- Full Text
- View/download PDF