Periodically collapsing rational bubbles in exchange rate: A Markov-switching analysis for a sample of industrialised markets
This paper investigates the presence of periodically collapsing rational bubbles in exchange rates for a sample of industrialised countries. A periodically collapsing rational bubble is defined as an explosive deviation from economic fundamentals with distinct expansion and contraction phases in finite time. By using Markov-switching regime models we were not able to find robust evidence of a bubble driving the exchange rate away from fundamentals. Moreover, the results also revealed significant non-linearities and different regimes. The importance of these findings suggests that linear monetary models may not be appropriate to examine exchange rate movements.
Year of publication: |
2006
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Authors: | Ferreira, José Eduardo de A. |
Publisher: |
Canterbury : University of Kent, Department of Economics |
Subject: | Foreign Exchange | Bubbles | Fundamentals | Markov-Switching | Assets |
Saved in:
freely available
Series: | |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 517483491 [GVK] hdl:10419/68121 [Handle] |
Classification: | F31 - Foreign Exchange ; F37 - International Finance Forecasting and Simulation ; F41 - Open Economy Macroeconomics |
Source: |
Persistent link: https://www.econbiz.de/10010290681
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