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Erschienen in:
2015 | OriginalPaper | Buchkapitel
The Meese-Rogoff Puzzle
verfasst von : Imad A. Moosa, Kelly Burns
Erschienen in: Demystifying the Meese-Rogoff Puzzle
Verlag: Palgrave Macmillan UK
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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.