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The Meese-Rogoff Puzzle

In: Demystifying the Meese-Rogoff Puzzle

Author

Listed:
  • Imad A. Moosa

    (Monash University)

  • Kelly Burns

    (Curtin University)

Abstract

The Meese-Rogoff puzzle refers to the proposition that exchange rate models cannot outperform the random walk in out-of-sample forecasting of exchange rates. This proposition is regarded as a puzzle because it does not make much sense for profit-maximising firms to pay for professional forecasts when the ‘better’ forecasts generated from the random walk are available for free. This proposition is valid only if forecasting accuracy is measured in terms of criteria that depend on the magnitude of the forecasting error only. The origin of the puzzle, the 1983 paper of Meese and Rogoff exhibits many flaws.

Suggested Citation

  • Imad A. Moosa & Kelly Burns, 2015. "The Meese-Rogoff Puzzle," Palgrave Macmillan Books, in: Demystifying the Meese-Rogoff Puzzle, chapter 1, pages 1-13, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-45248-1_1
    DOI: 10.1057/9781137452481_1
    as

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    Cited by:

    1. Kelly Burns & Imad Moosa, 2017. "Demystifying the Meese–Rogoff puzzle: structural breaks or measures of forecasting accuracy?," Applied Economics, Taylor & Francis Journals, vol. 49(48), pages 4897-4910, October.
    2. Nicolás Magner & Nicolás Hardy, 2022. "Cryptocurrency Forecasting: More Evidence of the Meese-Rogoff Puzzle," Mathematics, MDPI, vol. 10(13), pages 1-27, July.

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