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The Determinants of Currency Market Forecasts: An Empirical Study

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  • John Harvey

    ()
    (Department of Economics, Texas Christian University)

Abstract

Empirical studies using surveys of exchange rate expectations have become very popular in the literature. The majority have concluded that shortterm currency market activity appears to be inconsistent with the standard neoclassical characterization and that, as a consequence, economists should shift their attention to the long run. This paper, rather than using foreign exchange surveys as an argument for ignoring the short run, treats them as a means of understanding it. To that end, an empirical test is conducted in which the survey results serve as the dependent variable. The results indicate that the expectational variables are not random, but exhibit a pattern. It is further shown that psychological factors play an important role in determining expectations, thus offering support for the Post Keynesian view of currency markets.

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File URL: http://www.econ.tcu.edu/RePEc/tcu/wpaper/wp01-02.pdf
File Function: First version, 2001
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Bibliographic Info

Paper provided by Texas Christian University, Department of Economics in its series Working Papers with number 200102.

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Length: 20 pages
Date of creation: Feb 2001
Date of revision:
Publication status: Published in Journal of Post Keynesian Economics, Fall 2002, pages 33-49
Handle: RePEc:tcu:wpaper:200102

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Web page: http://www.econ.tcu.edu/
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Keywords: empirical; exchange rates; expectations; Post Keynesian;

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References

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  1. John T. Harvey, 1996. "Orthodox Approaches to Exchange Rate Determination: A Survey," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 18(4), pages 567-583, July.
  2. Shinji Takagi, 1991. "Exchange Rate Expectations: A Survey of Survey Studies," IMF Staff Papers, Palgrave Macmillan, vol. 38(1), pages 156-183, March.
  3. Stephan Schulmeister, 1988. "Currency speculation and dollar fluctuations," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 41(167), pages 343-365.
  4. Mark P. Taylor, 1995. "The Economics of Exchange Rates," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 13-47, March.
  5. Taylor, Mark P. & Allen, Helen, 1992. "The use of technical analysis in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 11(3), pages 304-314, June.
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Cited by:
  1. John Harvey, 2009. "Currency Market Participants' Mental Model and the Collapse of the Dollar: 2001-2008," Working Papers 200901, Texas Christian University, Department of Economics.

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