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The determinants of currency market forecasts: an empirical study

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  • JOHN T. HARVEY

Abstract

Empirical studies using surveys of exchange rate expectations have become very popular in the literature. The majority have concluded that short-term 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.

Suggested Citation

  • John T. Harvey, 2002. "The determinants of currency market forecasts: an empirical study," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 25(1), pages 33-49.
    • Handle: RePEc:mes:postke:v:25:y:2002:i:1:p:33-49
    DOI: 10.1080/01603477.2002.11051346
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    Cited by:

    1. John Harvey, 2009. "Currency Market Participants' Mental Model and the Collapse of the Dollar: 2001-2008," Journal of Economic Issues, Taylor & Francis Journals, vol. 43(4), pages 931-949.

    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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