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How Much Are Exchange Rate Forecasts Worth?

Author

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  • Meher Manzur

    (Economic Research Centre, Department of Economics, University of Western Australia.)

Abstract

This paper undertakes empirical tests of the ability of foreign exchange market participants to forecast the future value of the Australian dollar for one- and four-week horizons. A new set of survey data published in The Australian newspaper is used for this purpose. The accuracy of the forecasts is compared with that of the forecasts given by the random walk model which corresponds to no-change extrapolation. In general, the results indicate that no-change extrapolation is almost as good as the survey forecasts.

Suggested Citation

  • Meher Manzur, 1988. "How Much Are Exchange Rate Forecasts Worth?," Australian Journal of Management, Australian School of Business, vol. 13(1), pages 93-113, June.
    • Handle: RePEc:sae:ausman:v:13:y:1988:i:1:p:93-113
    DOI: 10.1177/031289628801300105
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    References listed on IDEAS

    as
    1. Hansen, Lars Peter & Hodrick, Robert J, 1980. "Forward Exchange Rates as Optimal Predictors of Future Spot Rates: An Econometric Analysis," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 829-853, October.
    2. Frankel, Jeffrey A & Froot, Kenneth A, 1987. "Using Survey Data to Test Standard Propositions Regarding Exchange Rate Expectations," American Economic Review, American Economic Association, vol. 77(1), pages 133-153, March.
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    5. Philip W. Lowe & Robert G. Trevor, 1986. "The Performance of Exchange Rate Forecasts," RBA Research Discussion Papers rdp8609, Reserve Bank of Australia.
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    9. Meese, Richard A. & Rogoff, Kenneth, 1983. "Empirical exchange rate models of the seventies : Do they fit out of sample?," Journal of International Economics, Elsevier, vol. 14(1-2), pages 3-24, February.
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    Cited by:

    1. M. Manzur, 1990. "Key Issues in Exchange Rate Economics," Economics Discussion / Working Papers 90-07, The University of Western Australia, Department of Economics.

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