De Grauwe, Paul; Rovira Kaltwasser, Pablo - In: Journal of Economic Dynamics and Control 36 (2012) 8, pp. 1176-1192
It is traditionally assumed in finance models that the fundamental value of an asset is known with certainty. In this paper we depart from that assumption. We propose a simple model of the exchange rate in which agents have biased and unbiased beliefs about the fundamental rate. We show that...