 The impact of uncertainty on professional exchange rate forecastsJoscha Beckmann and Robert Czudaj Journal of International Money and Finance, 2017, vol. 73, issue PB, 296-316 Abstract: This paper analyzes the role of uncertainty on both exchange rate expectations and forecast errors of professionals for four major currencies based on survey data provided by FX4casts. We consider economic policy, macroeconomic, and financial uncertainty as well as disagreement among CPI inflation forecasters to account for different dimensions of uncertainty. Based on a Bayesian VAR approach, we observe that uncertainty effects on forecast errors of professionals turn out to be more significant compared to the adjustment of exchange rate expectations. Our findings are robust to different forecasting horizons and point to an unpredictable link between exchange rates and fundamentals. Furthermore, we illustrate the importance of considering common unpredictable components for a large number of variables. We also focus on the post-crisis period and the relationship between uncertainty and disagreement among exchange rate forecasters and identify a strong relationship between them. Keywords: Bayesian VAR; Exchange rates; Expectations; Forecast; Uncertainty (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:73:y:2017:i:pb:p:296-316 DOI: 10.1016/j.jimonfin.2017.02.009 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
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