Long Swings in the Dollar: Are They in the Data and Do Markets Know It?
AbstractThe value of the dollar appears to move in one direction for long periods of time. The authors develop a new statistical model of exchange rate dynamics as a sequence of stochastic, segmented time trends. They reject the null hypothesis that exchange rates follow a random walk in favor of their model of long swings. The authors' model also generates better forecasts than a random walk. The specification is a natural framework for assessing the importance of the "peso problem" for the dollar. The authors nonetheless reject uncovered interest parity. Copyright 1990 by American Economic Association.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 80 (1990)
Issue (Month): 4 (September)
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