Dornbusch Was Wrong: There is no Convincing Evidence of Overshooting, Delayed or Otherwise
AbstractSeveral articles claim that Eichenbaum and Evans (1995) shows that nominal exchange rates experience a delayed version of Dornbusch overshooting. These same articles usually claim that impulse responses similar to those in Eichenbaum and Evans are evidence of such overshooting. But Eichenbaum and Evans never claim that their evidence implies overshooting, delayed or otherwise. More importantly, impulse response functions like those in Eichenbaum and Evans do not support overshooting. Three recent articles repeat this misinterpretation of the evidence. My objective is to use those articles to illustrate how the evidence about overshooting is widely misinterpreted. What is interpreted as supporting overshooting is at least as consistent with an efficient market as it is with overshooting.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics, UC Santa Barbara in its series University of California at Santa Barbara, Economics Working Paper Series with number qt78k0b5zw.
Date of creation: 13 Sep 2009
Date of revision:
Contact details of provider:
Postal: 2127 North Hall, Santa Barbara, CA 93106-9210
Phone: (805) 893-3670
Fax: (805) 893-8830
Web page: http://www.escholarship.org/repec/ucsbecon_dwp/
More information through EDIRC
overshooting; exchange rates; foreign exchange markets; Social and Behavioral Sciences; Other Applied Mathematics;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pippenger, John, 2008. "Freely Floating Exchange Rates Do Not Systematically Overshoot," University of California at Santa Barbara, Economics Working Paper Series qt97m8z6hw, Department of Economics, UC Santa Barbara.
- Kalyvitis, Sarantis & Michaelides, Alexander, 2001.
"New evidence on the effects of US monetary policy on exchange rates,"
Open Access publications from London School of Economics and Political Science
http://eprints.lse.ac.uk/, London School of Economics and Political Science.
- Kalyvitis, Sarantis & Michaelides, Alexander, 2001. "New evidence on the effects of US monetary policy on exchange rates," Economics Letters, Elsevier, vol. 71(2), pages 255-263, May.
- Almuth Scholl & Harald Uhlig, 2005.
"New Evidence on the Puzzles. Results from Agnostic Identification on Monetary Policy and Exchange Rates,"
SFB 649 Discussion Papers
SFB649DP2005-037, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Scholl, Almuth & Uhlig, Harald, 2008. "New evidence on the puzzles: Results from agnostic identification on monetary policy and exchange rates," Journal of International Economics, Elsevier, vol. 76(1), pages 1-13, September.
- Jaehun Chung & Yongmiao Hong, 2007. "Model-free evaluation of directional predictability in foreign exchange markets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(5), pages 855-889.
- anonymous, 2003. "Monetary policy report to the congress," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Aug, pages 351-378.
- anonymous, 2005. "Monetary policy report to the Congress," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Spr, pages 117-142.
- anonymous, . "The implementation of monetary policy," Monograph, Board of Governors of the Federal Reserve System (U.S.), number 2005tiom.
- Kim, Soyoung, 2005. "Monetary Policy, Foreign Exchange Policy, and Delayed Overshooting," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(4), pages 775-82, August.
- anonymous, . "Monetary policy and the economy," Monograph, Board of Governors of the Federal Reserve System (U.S.), number 2005mpat.
- Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December.
- Kim, Soyoung, 2003. "Monetary policy, foreign exchange intervention, and the exchange rate in a unifying framework," Journal of International Economics, Elsevier, vol. 60(2), pages 355-386, August.
- anonymous, 2005. "Monetary policy report to the Congress," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Sum, pages 319-343.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff).
If references are entirely missing, you can add them using this form.