Forecasting of Some Major Exchange Rates: Structural and Time Series Model's Results

It is generally pointed out that the forecasting performance of the structural models of the exchange-rate determination is poorer than that of the native Random-walk models. Among the most influential of the empirical studies of exchange-rate forecasting models were those performed by Meese and Rogoff (1983 a, 1983 b, 1985) (M - R) who found that during the 1976-1984 period on structural or time-series technique could appreciably outperform the Random-walk at any forecasting horizon shorter than 12 months. The forecasts M - R construced were based on the actual future values of the exogenous variables.