Exchange Rate Puzzles: A Review of the Recent Theoretical and Empirical Developments
AbstractThis paper presents a comprehensive literature review of the theoretical and empirical developments that have taken place over the last two decades in an attempt to address the exchange rate puzzles. Specifically, we discuss non-linear and Bayesian econometric techniques, Dynamic General Equilibrium models, and the Market Microstructure approach that has been designed to address three exchange rate puzzles, namely, the Purchasing Power Parity (PPP) puzzle, the exchange rate disconnect puzzle and the exchange rate determination puzzle. We conclude that the exchange rate puzzles are likely to be less puzzling, if researchers decide to move to non-linear econometric frameworks and microfounded general equilibrium models.
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Bibliographic InfoPaper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200827.
Length: 36 pages
Date of creation: Jul 2008
Date of revision:
Dynamic General Equilibrium Models; Exchange Rate Puzzles; Non-Linear and Bayesian Econometric Models;
Other versions of this item:
- Thabo M Mokoena & Rangan Gupta & Renee van Eyden, 2010. "Exchange Rate Puzzles: A Review of the Recent Theoretical and Empirical Developments," The IUP Journal of Monetary Economics, IUP Publications, IUP Publications, vol. 0(1 & 2), pages 77-112, February .
- C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
- C4 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics
- F3 - International Economics - - International Finance
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-30 (All new papers)
- NEP-CBA-2008-07-30 (Central Banking)
- NEP-DGE-2008-07-30 (Dynamic General Equilibrium)
- NEP-OPM-2008-07-30 (Open Economy Macroeconomics)
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For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rangan Gupta).
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