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Models of Exchange Rate Expectations: Heterogeneous Evidence from Panel Data

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  • Agnès Bénassy-Quéré
  • Sophie Larribeau
  • Ronald MacDonald

Abstract

Central to an understanding of how foreign exchange markets work is the nature of the expectations formation process. Of particular interest are the potentially stabilising of destabilising nature of these expectations. In this paper we use a unique disaggregate expectations data base to model the expectations formation of around 40 leading foreign exchange forecasters/dealer.

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Bibliographic Info

Paper provided by CEPII research center in its series Working Papers with number 1999-03.

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Date of creation: Apr 1999
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Handle: RePEc:cii:cepidt:1999-03

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Keywords: finance; panel data; model; expectations; exchange rate; heterogeneity;

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  1. Frankel, Jeff & Froot, Ken, 1986. "Using Survey Data to Test Standard Propositions Regarding Exchange Rate Expectations," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt1972q8wm, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  2. Hsiao, C., 1992. "Random Coefficients Models," Papers, Southern California - Department of Economics 9212, Southern California - Department of Economics.
  3. Jeffrey A. Frankel and Andrew K. Rose., 1995. "A Survey of Empirical Research on Nominal Exchange Rates," Center for International and Development Economics Research (CIDER) Working Papers, University of California at Berkeley C95-051, University of California at Berkeley.
  4. Shinji Takagi, 1991. "Exchange Rate Expectations: A Survey of Survey Studies," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 156-183, March.
  5. Jeffrey A. Frankel & Kenneth A. Froot, 1986. "The Dollar as an Irrational Speculative Bubble: A Tale of Fundamentalisists," NBER Working Papers 1854, National Bureau of Economic Research, Inc.
  6. John Ammer & Allan D. Brunner, 1994. "Are banks market timers or market makers? Explaining foreign exchange trading profits," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 484, Board of Governors of the Federal Reserve System (U.S.).
  7. J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1989. "Positive Feedback Investment Strategies and Destabilizing Rational Speculation," NBER Working Papers 2880, National Bureau of Economic Research, Inc.
  8. Goodhart, Charles, 1988. "The Foreign Exchange Market: A Random Walk with a Dragging Anchor," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 55(220), pages 437-60, November.
  9. Remzi Uctum & Georges Prat, 1996. "Formation des anticipations de change : l'hypothèse d'un processus mixte," Économie et Prévision, Programme National Persée, Programme National Persée, vol. 125(4), pages 117-135.
  10. Cavaglia, Stefano & Verschoor, Willem F. C. & Wolff, Christian C. P., 1993. "Further evidence on exchange rate expectations," Journal of International Money and Finance, Elsevier, Elsevier, vol. 12(1), pages 78-98, February.
  11. MacDonald, Ronald, 1992. "Exchange Rate Survey Data: A Disaggregated G-7 Perspective," The Manchester School of Economic & Social Studies, University of Manchester, University of Manchester, vol. 60(0), pages 47-62, Supplemen.
  12. Philipp Hartmann, 1996. "Trading Volumes and Transaction Costs in the Foreign Market - Evidence from Daily Dollar-Yen Spot Data," FMG Discussion Papers, Financial Markets Group dp232, Financial Markets Group.
  13. Ronald Macdonald, 1995. "Long-Run Exchange Rate Modeling: A Survey of the Recent Evidence," IMF Staff Papers, Palgrave Macmillan, vol. 42(3), pages 437-489, September.
  14. Pesaran, M. Hashem, 1989. "Consistency of short-term and long-term expectations," Journal of International Money and Finance, Elsevier, Elsevier, vol. 8(4), pages 511-516, December.
  15. Ronald MacDonald, 1995. "Long-Run Exchange Rate Modeling," IMF Working Papers, International Monetary Fund 95/14, International Monetary Fund.
  16. MacDonald, Ronald & Torrance, T S, 1988. "On Risk, Rationality and Excessive Speculation in the Deutschmark-U.S. Dollar Exchange Market: Some Evidence Using Survey Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 50(2), pages 107-23, May.
  17. Macdonald, Ronald & Marsh, Ian W., 1996. "Currency forecasters are heterogeneous: confirmation and consequences," Journal of International Money and Finance, Elsevier, Elsevier, vol. 15(5), pages 665-685, October.
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  20. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, Elsevier, vol. 108(1), pages 1-24, May.
  21. Paul Hallwood & Ronald MacDonald, 2008. "International Money and Finance," Working papers, University of Connecticut, Department of Economics 2008-02, University of Connecticut, Department of Economics.
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Citations

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Cited by:
  1. Michel Beine & Agnes Bénassy-Quéré & Ronald MacDonald, 2007. "The impact of Central Bank intervention on exchange rate forecasts heterogeneity," ULB Institutional Repository 2013/10423, ULB -- Universite Libre de Bruxelles.
  2. Thierry Mayer & Keith Head, 2002. "Illusory Border Effects: Distance Mismeasurement Inflates Estimates of Home Bias in Trade," Working Papers, CEPII research center 2002-01, CEPII research center.
  3. De Grauwe, Paul & Markiewicz, Agnieszka, 2013. "Learning to forecast the exchange rate: Two competing approaches," Journal of International Money and Finance, Elsevier, Elsevier, vol. 32(C), pages 42-76.

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