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The Random Behavior of the Flexible Exchange Rates: Implications for Forecasting

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  • Ian H Giddy

    (University of Michigan)

  • Gunter Dufey

    (University of Michigan)

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    Abstract

    This article explores the forecasting accuracy of the “random walk” and other models of exchange rate behavior. Under present conditions of floating exchange rates, it is argued, anticipations of future demand and supply determine fluctuations in exchange rates. The authors present results consistent with the notion that, for the world's major currencies, the foreign exchange market is an “efficient market” and exchange rate forecasting is not profitable.© 1975 JIBS. Journal of International Business Studies (1975) 6, 1–32

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    Bibliographic Info

    Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

    Volume (Year): 6 (1975)
    Issue (Month): 1 (March)
    Pages: 1-32

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    Handle: RePEc:pal:jintbs:v:6:y:1975:i:1:p:1-32

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    Web page: http://www.palgrave-journals.com/

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    Cited by:
    1. Beat Gerber, 1980. "Der Zufallscharakter im Wechselkursverhalten," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 116(IV), pages 403-422, December.
    2. Yuanchen Chang, 2004. "A re-examination of variance-ratio test of random walks in foreign exchange rates," Applied Financial Economics, Taylor and Francis Journals, vol. 14(9), pages 671-679.
    3. Sifunjo E. Kisaka & Wainaina Gituro & Pokhariyal Ganesh & Ngugi W. Rose, 2008. "An analysis of the efficiency of the foreign exchange market in Kenya," Economics Bulletin, AccessEcon, vol. 14(2), pages 1-13.
    4. Frank McCormick, 1979. "A simple model of the welfare effects of central bank intervention in the foreign exchange market," International Finance Discussion Papers 147, Board of Governors of the Federal Reserve System (U.S.).
    5. Hans Genberg & Jean-Pierre Roth, 1979. "Exchange-Rate Stabilization Policy and Monetary Target with Endogenous Expectations," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 115(III), pages 527-545, September.
    6. Fathi Abid & Moncef Habibi, 2010. "Hedging Transaction Exposure Within The Context Of A Basket Foreign Exchange Rate Arrangement," Working Papers 523, Economic Research Forum, revised May 2010.
    7. Ajayi, Richard A. & Karemera, David, 1996. "A variance ratio test of random walks in exchange rates: Evidence from Pacific Basin economies," Pacific-Basin Finance Journal, Elsevier, vol. 4(1), pages 77-91, May.
    8. Belaire-Franch, Jorge & Opong, Kwaku K., 2005. "Some evidence of random walk behavior of Euro exchange rates using ranks and signs," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1631-1643, July.
    9. repec:ebl:ecbull:v:14:y:2008:i:2:p:1-13 is not listed on IDEAS
    10. Stanley Black, 1978. "Policy responses to major disturbances of the 1970s and their transmission through international goods and capital markets," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 114(4), pages 614-641, December.

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