Advanced Search
MyIDEAS: Login

Agents' Rationality and the CHF/USD Exchange Rate, Part I

Contents:

Author Info

  • Hermann Garbers
Registered author(s):

    Abstract

    The analysis of monthly exchange rates is carried out using a model of McCallum, which is based on the concept of Rational Expectations. Applying the model to the CHF/USD exchange rate starting a misspecification analysis, the RE component appears to be a weak point of the model. The theory of rational beliefs of M. Kurz generalizes the RE concept introducing special consideration of Data Generating Processes (DGP). We find, however, some evidence speaking against the rational belief approach (with respect to the CHF/USD exchange rate) which is related to regime switchings and the presence of unobserved variables in the data-generating process. It appears that the rationality of economic agents depends on complex cognitive processes not discussed by Kurz, but taken into account in a ''story'' by Paul De Grauwe. This story will be supplemented in Part II of the paper in order to eliminate the RE component and to proceed with the misspecification analysis of McCallum's model.

    Download Info

    If 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.
    File URL: http://www.iew.uzh.ch/wp/iewwp163.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Institute for Empirical Research in Economics - University of Zurich in its series IEW - Working Papers with number 163.

    as in new window
    Length:
    Date of creation:
    Date of revision:
    Handle: RePEc:zur:iewwpx:163

    Contact details of provider:
    Postal: Bl├╝mlisalpstrasse 10, CH-8006 Z├╝rich
    Phone: +41-1-634 22 05
    Fax: +41-1-634 49 07
    Email:
    Web page: http://www.econ.uzh.ch/
    More information through EDIRC

    Related research

    Keywords: General Economics and Methodology;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. McCallum, Bennett T., 1994. "A reconsideration of the uncovered interest parity relationship," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 105-132, February.
    2. Fama, Eugene F., 1984. "Forward and spot exchange rates," Journal of Monetary Economics, Elsevier, vol. 14(3), pages 319-338, November.
    3. Mordecai Kurz, . "Endogenous Uncertainty: A Unified View of Market Volatility," Working Papers 98013, Stanford University, Department of Economics.
    4. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:zur:iewwpx:163. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marita Kieser).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.