Abstract
This study investigates the directional accuracy of Chinese renminbi exchange rate forecasts by professional forecasters. The forecast with a horizon of one year is useful, whereas the forecasts with forecast horizons of one and three months are not useful in predicting the direction of the exchange rate change. The results for the long-term forecasts suggest that forecasters believe that the government maintains its foreign exchange rate policy of renminbi appreciation. In contrast, short-term forecasts show consistent evidence of exchange rate unpredictability.
Acknowledgement
We are grateful to an anonymous referee for helpful comments and constructive suggestions. The usual disclaimers apply.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1. See Ash, Smyth, and Heravi (Citation1998) and Henriksson and Merton (Citation1981) for details.
2. Although not reported in this paper, results on the individual forecasts generally show negative evidence of the RMB exchange rate predictability regardless of the forecast horizons. This study focuses on the pooled forecasts as Greer (Citation2003) because there are not as many observations for each individual forecaster as standard contingency table approach requires.
3. See Pesaran and Timmermann (Citation2009) for details.