A Reconsideration of the Meese-Rogoff Puzzle – Alternative Approaches to Model Estimation and Forecast Evaluation
This study revisits the Meese-Rogoff puzzle by estimating the traditional monetary models of exchange rate determination in state-space form and comparing the accuracy of these forecasts against the naïve random walk model using a wide range of conventional and alternative measures of forecasting ac...
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| Format: | Journal Article |
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Multinational Finance Society
2016
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| Online Access: | http://hdl.handle.net/20.500.11937/74380 |
| _version_ | 1848763258756923392 |
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| author | Burns, Kelly |
| author_facet | Burns, Kelly |
| author_sort | Burns, Kelly |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | This study revisits the Meese-Rogoff puzzle by estimating the traditional monetary models of exchange rate determination in state-space form and comparing the accuracy of these forecasts against the naïve random walk model using a wide range of conventional and alternative measures of forecasting accuracy. The results demonstrate that incorporating stochastic movements in the parameters of exchange rate models does not enable the Meese-Rogoff puzzle to be overturned. However, estimating these models in state-space form substantially improves forecasting accuracy to the extent that the model and random walk produce an equivalent magnitude of error. Furthermore, the results prove that the Meese-Rogoff puzzle can be overturned if the forecasts are evaluated by alternative criteria. These criteria include direction accuracy, profitability, and measures that jointly take into account both magnitude and direction accuracy. |
| first_indexed | 2025-11-14T11:00:36Z |
| format | Journal Article |
| id | curtin-20.500.11937-74380 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T11:00:36Z |
| publishDate | 2016 |
| publisher | Multinational Finance Society |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-743802019-02-19T04:16:42Z A Reconsideration of the Meese-Rogoff Puzzle – Alternative Approaches to Model Estimation and Forecast Evaluation Burns, Kelly This study revisits the Meese-Rogoff puzzle by estimating the traditional monetary models of exchange rate determination in state-space form and comparing the accuracy of these forecasts against the naïve random walk model using a wide range of conventional and alternative measures of forecasting accuracy. The results demonstrate that incorporating stochastic movements in the parameters of exchange rate models does not enable the Meese-Rogoff puzzle to be overturned. However, estimating these models in state-space form substantially improves forecasting accuracy to the extent that the model and random walk produce an equivalent magnitude of error. Furthermore, the results prove that the Meese-Rogoff puzzle can be overturned if the forecasts are evaluated by alternative criteria. These criteria include direction accuracy, profitability, and measures that jointly take into account both magnitude and direction accuracy. 2016 Journal Article http://hdl.handle.net/20.500.11937/74380 Multinational Finance Society restricted |
| spellingShingle | Burns, Kelly A Reconsideration of the Meese-Rogoff Puzzle – Alternative Approaches to Model Estimation and Forecast Evaluation |
| title | A Reconsideration of the Meese-Rogoff Puzzle – Alternative Approaches to Model Estimation and Forecast Evaluation |
| title_full | A Reconsideration of the Meese-Rogoff Puzzle – Alternative Approaches to Model Estimation and Forecast Evaluation |
| title_fullStr | A Reconsideration of the Meese-Rogoff Puzzle – Alternative Approaches to Model Estimation and Forecast Evaluation |
| title_full_unstemmed | A Reconsideration of the Meese-Rogoff Puzzle – Alternative Approaches to Model Estimation and Forecast Evaluation |
| title_short | A Reconsideration of the Meese-Rogoff Puzzle – Alternative Approaches to Model Estimation and Forecast Evaluation |
| title_sort | reconsideration of the meese-rogoff puzzle – alternative approaches to model estimation and forecast evaluation |
| url | http://hdl.handle.net/20.500.11937/74380 |