IDEAS home Printed from https://ideas.repec.org/a/taf/apeclt/v1y1994i1p14-18.html
   My bibliography  Save this article

Consistency under exponential forecasting

Author

Listed:
  • Swarna Dutt

Abstract

We study the consistency property in the exchange rate expectation formation process, which all rational forecasts have, but which itself does not require rationality. An alternative test procedure recommended by Pesaran (1989) is applied. Survey data helps avoid the risk premium issue altogether. The exponential forecasting framework provides evidence of bandwagon effects in the expectation formation process. Consistency is upheld at the shorter forecast horizon, but breaks down conclusively for the longer forecast periods. These results are supported by Froot and Ito (1989).

Suggested Citation

  • Swarna Dutt, 1994. "Consistency under exponential forecasting," Applied Economics Letters, Taylor & Francis Journals, vol. 1(1), pages 14-18.
    • Handle: RePEc:taf:apeclt:v:1:y:1994:i:1:p:14-18
    DOI: 10.1080/135048594358375
    as

    Download full text from publisher

    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/135048594358375&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/135048594358375?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Froot, Kenneth A. & Ito, Takatoshi, 1989. "On the consistency of short-run and long-run exchange rate expectations," Journal of International Money and Finance, Elsevier, vol. 8(4), pages 487-510, December.
    2. Pesaran, M. Hashem, 1989. "Consistency of short-term and long-term expectations," Journal of International Money and Finance, Elsevier, vol. 8(4), pages 511-516, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Swarna Dutt & Dipak Ghosh, 1997. "Are experts' expectations rational? A multicurrency analysis," Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 803-812.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ronald MacDonald, 2000. "Expectations Formation and Risk in Three Financial Markets: Surveying What the Surveys Say," Journal of Economic Surveys, Wiley Blackwell, vol. 14(1), pages 69-100, February.
    2. Agnès Bénassy-Quéré & Hélène Raymond, 1996. "Les erreurs de prévision de change ont-elles des caractéristiques hétérogènes ?," Économie et Prévision, Programme National Persée, vol. 125(4), pages 137-157.
    3. Jeffrey A. Frankel., 1992. "The Evolving Japanese Financial System, and the Cost of Capital," Center for International and Development Economics Research (CIDER) Working Papers C92-002, University of California at Berkeley.
    4. Yin-Wong Cheung & Menzie D. Chinn & Ian W. Marsh, 2004. "How do UK-based foreign exchange dealers think their market operates?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(4), pages 289-306.
    5. Richard Baldwin & Richard Lyons, 1989. "Exchange Rate Hysteresis: The Real Effects of Large vs Small Policy Misalignments," NBER Working Papers 2828, National Bureau of Economic Research, Inc.
    6. Zsolt Darvas & Zoltan Schepp, 2009. "Long maturity forward rates of major currencies are stationary," Applied Economics Letters, Taylor & Francis Journals, vol. 16(11), pages 1175-1181.
    7. Jeffrey A. Frankel, 1991. "Japanese Finance in the 1980s: A Survey," NBER Chapters, in: Trade with Japan: Has the Door Opened Wider?, pages 225-270, National Bureau of Economic Research, Inc.
    8. Andrew Patton & Allan Timmermann, 2012. "Forecast Rationality Tests Based on Multi-Horizon Bounds," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(1), pages 1-17.
    9. Bruno Jetin, 2003. "How can a Currency Transaction Tax Stabilize Foreign Exchange Markets?," Post-Print halshs-03211712, HAL.
    10. Swarna Dutt, 1997. "A microstructural analysis of the exchange rate expectation formation process," Applied Economics Letters, Taylor & Francis Journals, vol. 4(9), pages 537-539.
    11. Yin-Wong Cheung & Menzie D. Chinn, 1999. "Macroeconomic Implications of the Beliefs and Behavior of Foreign Exchange Traders," NBER Working Papers 7417, National Bureau of Economic Research, Inc.
    12. Lukas Menkhoff & Mark P. Taylor, 2007. "The Obstinate Passion of Foreign Exchange Professionals: Technical Analysis," Journal of Economic Literature, American Economic Association, vol. 45(4), pages 936-972, December.
    13. Simon Sosvilla-Rivero & Mar�a del Carmen Ramos-Herrera, 2013. "On the forecast accuracy and consistency of exchange rate expectations: the Spanish PwC Survey," Applied Economics Letters, Taylor & Francis Journals, vol. 20(2), pages 107-110, February.
    14. Cheung, Yin-Wong & Chinn, Menzie David, 2001. "Currency traders and exchange rate dynamics: a survey of the US market," Journal of International Money and Finance, Elsevier, vol. 20(4), pages 439-471, August.
    15. Swarna Dutt & Dipak Ghosh, 1997. "Are experts' expectations rational? A multicurrency analysis," Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 803-812.
    16. Verschoor, Willem F. C. & Wolff, Christian C. P., 2001. "Exchange risk premia, expectations formation and "news" in the Mexican peso/U.S. dollar forward exchange rate market," International Review of Financial Analysis, Elsevier, vol. 10(2), pages 157-174.
    17. Frankel, Jeffrey, 1995. "How Well Do Foreign Exchange Markets Function: Might a Tobin Tax Help?," Center for International and Development Economics Research (CIDER) Working Papers 233420, University of California-Berkeley, Department of Economics.
    18. Dumitriu, Ramona & Nistor, Costel & Stefanescu, Razvan, 2009. "Changes in the monthly effects from the Romanian foreign exchange market," MPRA Paper 41743, University Library of Munich, Germany, revised 08 May 2010.
    19. Cheung, Y. -W. & Chinn, M. D., 1998. "Integration, cointegration and the forecast consistency of structural exchange rate models," Journal of International Money and Finance, Elsevier, vol. 17(5), pages 813-830, October.
    20. Zsolt Darvas & Zoltán Schepp, 2007. "Forecasting Exchange Rates of Major Currencies with Long Maturity Forward Rates," Working Papers 0705, Department of Mathematical Economics and Economic Analysis, Corvinus University of Budapest.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:1:y:1994:i:1:p:14-18. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEL20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.