Meese-Rogoff Redux: Micro-Based Exchange-Rate Forecasting

Martin Evans and Richard K. Lyons

Chapter 11 in Studies in Foreign Exchange Economics, 2017, pp 457-475 from World Scientific Publishing Co. Pte. Ltd.

Abstract: This paper compares the true, ex ante forecasting performance of a micro-based model against both a standard macro model and a random walk. In contrast to existing literature, which is focused on longer horizon forecasting, we examine forecasting over horizons from one day to one month (the one-month horizon being where micro and macro analysis begin to overlap). Over our three-year forecasting sample, we find that the micro-based model consistently outperforms both the random walk and the macro model. Micro-based forecasts account for almost 16 percent of the sample variance in monthly spot rate changes. These results provide a level of empirical validation as yet unattained by other models…

Keywords: Exchange Rates; Foreign Currency; Microstructure (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Meese-Rogoff Redux: Micro-Based Exchange-Rate Forecasting (2005)
Working Paper: Meese-Rogoff Redux: Micro-Based Exchange Rate Forecasting (2005)
Working Paper: Meese-Rogoff Redux: Micro-Based Exchange Rate Forecasting (2005)
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