Short-term and Long-Term Expectations of the Yen/Dollar Exchange Rate: Evidence from Survey Data
Three surveys of exchange rate expectations allow us to measure directly the expected rates of return on yen versus dollars. Expectations of yen appreciation against the dollar have been (1) consistently large, (2) variable, and (3) greater than the forward premium, implying that investors were willing to accept a lower expected return on dollar assets. At short-term horizons expectations exhibit bandwagon effects, while at longer-term horizons they show the reverse. A 10 percent yen appreciation generates the expectation of a further appreciation of 2.4 percent over the following week, for example, but a depreciation of 3.4 percent over the following year. At any horizon, investors would do better to reduce the absolute magnitude of expected depreciation. The true spot rate process behaves more like a random walk.
|Date of creation:||Apr 1987|
|Date of revision:|
|Publication status:||published as Frankel, Jeffrey A. and Kenneth A. Froot. "Short-term and Long-term Expectations of the Yen/Dollar Exchange Rate: Evidence from Survey Data," From Journal of the Japanese and International Economies, Vol. 1, pp. 249-274,(1987).|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Fama, Eugene F., 1984. "Forward and spot exchange rates," Journal of Monetary Economics, Elsevier, vol. 14(3), pages 319-338, November.
- John F. O. Bilson, 1981. "Profitability and Stability in International Currency Markets," NBER Working Papers 0664, National Bureau of Economic Research, Inc.
- Paul Krugman, 1986. "Is the Japan Problem Over?," NBER Working Papers 1962, National Bureau of Economic Research, Inc.
- Takatoshi Ito, 1984.
"Use of (Time-Domain) Vector Autoregressions to Test Uncovered Interest Parity,"
NBER Working Papers
1493, National Bureau of Economic Research, Inc.
- Ito, Takatoshi, 1988. "Use of (Time-Domain) Vector Autoregressions to Test Uncovered Interest Parity," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 296-305, May.
- Hodrick, Robert J. & Srivastava, Sanjay, 1984.
"An investigation of risk and return in forward foreign exchange,"
Journal of International Money and Finance,
Elsevier, vol. 3(1), pages 5-29, April.
- Robert J. Hodrick & Sanjay Srivastava, 1983. "An Investigation of Risk and Return in Forward Foreign Exchange," NBER Working Papers 1180, National Bureau of Economic Research, Inc.
- Frankel, Jeffrey A., 1982. "In search of the exchange risk premium: A six-currency test assuming mean-variance optimization," Journal of International Money and Finance, Elsevier, vol. 1(1), pages 255-274, January.
- Richard C. Marston, 1986. "Real Exchange Rates and Productivity Growth in the United States and Japan," NBER Working Papers 1922, National Bureau of Economic Research, Inc.
- Manuel H. Johnson & Bonnie E. Loopesko, 1986. "The yen-dollar relationship: a recent historical perspective," International Finance Discussion Papers 288, Board of Governors of the Federal Reserve System (U.S.).
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:2216. 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: ()
If references are entirely missing, you can add them using this form.