Alan Greenspan 1 once noted that “forecasting exchange rates has a success rate no better than that of forecasting the outcome of a coin toss”. I wonder whether we can derive valuable insights from hindsight. Getting answers about the consequences of exchange rate movements for the economy seems to be by no means easier.
Before I illustrate the limitations each forecaster in the economic environment faces, allow me to quote prof. Philip Tetlock, who has for years been researching the ability to forecast political and economic events.