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On the Statistical Properties of Floating Exchange Rates: A Reassessment of Recent Experience and Literature

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  • Shinji Takagi

    (Economist, Research Division 1, Institute for Monetary and Economic Studies, Bank of Japan)

Abstract

The paper reviews the statistical behavior of major currency exchange rates during 1975-86. A close inspection indicates small deviations of recent exchange rate behavior from random walks and some systematic movements in monthly data, possibly corresponding to the relatively infrequent arrivals of information concerning major macroeconomic variables. The distributional characteristics of exchange rate changes differ between daily and monthly data and thus imply the possible presence of heterogeneity in underlying factors. These and other observations suggest care in the use of daily data in empirical work and the usefulness of explicit modeling of heterogeneity among market participants and in information structure.

Suggested Citation

  • Shinji Takagi, 1988. "On the Statistical Properties of Floating Exchange Rates: A Reassessment of Recent Experience and Literature," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 6(1), pages 61-91, May.
    • Handle: RePEc:ime:imemes:v:6:y:1988:i:1:p:61-91
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    File URL: http://www.imes.boj.or.jp/research/papers/english/me6-1-3.pdf
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    Cited by:

    1. Maria Aguirre & Reza Saidi, 1999. "Feedback trading in exchange-rate markets: Evidence from within and across economic blocks," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 23(1), pages 1-14, March.
    2. Annina Kaltenbrunner & Machiko Nissanke, 2009. "The Case for an Intermediate Exchange Rate Regime with Endogenizing Market Structures and Capital Mobility: The Empirical Study of Brazil," WIDER Working Paper Series RP2009-29, World Institute for Development Economic Research (UNU-WIDER).
    3. Luis E. Rivero M., 1989. "Literature trends on the relationship between finance and economic growth," Economía, Instituto de Investigaciones Económicas y Sociales (IIES). Facultad de Ciencias Económicas y Sociales. Universidad de Los Andes. Mérida, Venezuela, vol. 14(4), pages 121-137, January-D.

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