More Survey Data on Exchange Rate Expectations: More Currencies, More Horizons, More Tests

UCSC Dept. of Economics Working Paper 312

Posted: 16 Jun 1998

See all articles by Menzie David Chinn

Menzie David Chinn

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics; National Bureau of Economic Research (NBER)

Jeffrey A. Frankel

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Date Written: Undated

Abstract

We apply a comprehensive set of survey data, on forecasts for 24 currencies against the dollar, to four topics. (1) We find some predictive power in the survey data (and in the right direction!). As in past tests, the forecasts are nevertheless biased: variability of expected depreciation is excessive, especially at the 3-month horizon. (2) We find some evidence of a time-varying risk premium, especially at the 12-month horizon. But the coefficient on the forward discount is usually significantly greater than 1/2, implying that the risk premium is less variable than is expected depreciation. (3) We examine new data on forecasts at the five-year horizon and obtain, somewhat disappointingly, only weak evidence of regressive expectations towards purchasing power parity. (4) We have no success in an attempt to use the survey data in an equation of exchange rate determination.

JEL Classification: F31, C42

Suggested Citation

Chinn, Menzie David and Frankel, Jeffrey A., More Survey Data on Exchange Rate Expectations: More Currencies, More Horizons, More Tests (Undated). UCSC Dept. of Economics Working Paper 312, Available at SSRN: https://ssrn.com/abstract=3082

Menzie David Chinn (Contact Author)

University of Wisconsin, Madison - Robert M. La Follette School of Public Affairs and Department of Economics ( email )

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Jeffrey A. Frankel

Harvard University - Harvard Kennedy School (HKS) ( email )

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HOME PAGE: http://www.ksg.harvard.edu/fs/jfrankel

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
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