Exchange Rates in Search of Fundamental Variables
AbstractIn this paper it is shown that relatively simple models are capable of generating exchange rate movements that, at least in the short run, are largely disconnected from their fundamental values. The essential ingredient of such models is the hypothesis that economic agents use different information sets. It is assumed that there are two classes of agents, fundamentalists and chartists. The former use the information contained in the model and a forecast of future fundamental variables. The latter forecast the future exchange rate based on past exchange rate movements. The interaction of these two classes of agents creates a non-linearity in the model and is responsible for the complex behaviour of the exchange rate.
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 C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1073.
Date of creation: Dec 1994
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Stefan Reitz, 2005. "Central Bank Intervention and Heterogeneous Exchange Rate Expectations: Evidence from the Daily DEM/US-Dollar Exchange Rate," Open Economies Review, Springer, vol. 16(1), pages 33-50, January.
- Kisu Simwaka, 2004. "A look at exchange rate and monetary policy in Malawi," Macroeconomics 0407017, EconWPA.
- Paul De Grauwe & Isabel Vansteenkiste, 2001.
"Exchange Rates and fundamentals - a Non-Linear Relationship?,"
CESifo Working Paper Series
577, CESifo Group Munich.
- Paul De Grauwe & Isabel Vansteenkiste, 2007. "Exchange rates and fundamentals: a non-linear relationship?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(1), pages 37-54.
- P. de Grauwe & I. Vansteenkiste, 2003. "Exchange Rates and Fundamentals a Non-Linear Relationship?," DNB Staff Reports (discontinued) 78, Netherlands Central Bank.
- Murray, J. & Van Norden, S. & Vigfusson, R., 1996. "Excess Volatility and Speculative Bubbles in the Canadian Dollar: Real of Imagined?," Technical Reports 76, Bank of Canada.
- Marie Bessec & François-Mathieu Robineau, 2003.
"Comportements chartistes et fondamentalistes. Coexistence ou domination alternative sur le marché des changes?,"
Presses de Sciences-Po, vol. 54(6), pages 1213-1238.
- Robineau, François-Mathieu & Bessec, Marie, 2003. "Comportements chartistes et fondamentalistes : Coexistence ou domination alternative sur le marché des changes ?," Economics Papers from University Paris Dauphine 123456789/10086, Paris Dauphine University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.