Consistency under exponential forecasting
- 1 January 1994
- journal article
- research article
- Published by Taylor & Francis in Applied Economics Letters
- Vol. 1 (1) , 14-18
- https://doi.org/10.1080/135048594358375
Abstract
We study the consistency property in the exchange rate expectation formation process, which all rational forecasts have, but which itself does not require rationality. An alternative test procedure recommended by Pesaran (1989) is applied. Survey data helps avoid the risk premium issue altogether. The exponential forecasting framework provides evidence of bandwagon effects in the expectation formation process. Consistency is upheld at the shorter forecast horizon, but breaks down conclusively for the longer forecast periods. These results are supported by Froot and Ito (1989).Keywords
This publication has 2 references indexed in Scilit:
- Consistency of short-term and long-term expectationsJournal of International Money and Finance, 1989
- On the consistency of short-run and long-run exchange rate expectationsJournal of International Money and Finance, 1989