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The Scapegoat Theory of Exchange Rates: The First Tests

Fratzscher, Marcel; Sarno, Lucio; Zinna, Gabriele - C.E.P.R. Discussion Papers - 2012

This paper provides an empirical test of the scapegoat theory of exchange rates (Bacchetta and van Wincoop 2004, 2011), as an attempt to evaluate its potential for explaining the poor empirical performance of traditional exchange rate models. This theory suggests that market participants may at...

Persistent link: https://www.econbiz.de/10011084052

How Do UK-Based Foreign Exchange Dealers Think Their Market Operates?

Cheung, Yin-Wong; Chinn, Menzie David; Marsh, Ian W - C.E.P.R. Discussion Papers - 1999

that heterogeneity of traders' beliefs is evident from the results but that it is not possible to explain such …

Persistent link: https://www.econbiz.de/10005067624

Expectations and Exchange Rate Policy

Devereux, Michael B; Engel, Charles M - C.E.P.R. Discussion Papers - 2006

Both empirical evidence and theoretical discussion have long emphasized the impact of `news' on exchange rates. In most exchange rate models, the exchange rate acts as an asset price, and as such responds to news about future returns on assets. But the exchange rate also plays a role in...

Persistent link: https://www.econbiz.de/10005666551

European Exchange Rate Credibility Before the Fall

Rose, Andrew K; Svensson, Lars E O - C.E.P.R. Discussion Papers - 1993

Realignment expectations which measure exchange rate credibility are analysed for European exchange rates using daily … expectations and macroeconomic variables, although there are signs that lower inflation improves credibility. Statistically, many … movements to realignment expectations are common to ERM participants. There were few indications of poor ERM credibility before …

Persistent link: https://www.econbiz.de/10005123774

Efficiency and Expectations Revisited: A Foreign Exchange Market with Bayesian Players

Christodoulakis, Nikos; Kalyvitis, Sarantis C; … - C.E.P.R. Discussion Papers - 1994

equations are reviewed and a model is developed that incorporates Bayesian revisions in the form of devaluation expectations. A …

Persistent link: https://www.econbiz.de/10005661525

Purchasing Power Parity and Heterogenous Mean Reversion

Koedijk, Kees; Tims, Ben; Dijk, Mathijs A Van - C.E.P.R. Discussion Papers - 2006

heterogeneity in the speed of mean reversion across real exchange rates into account. We compare the performance of homogeneous and …

Persistent link: https://www.econbiz.de/10005792288

Properties of Foreign Exchange Risk Premiums

Sarno, Lucio; Schneider, Paul; Wagner, Christian - C.E.P.R. Discussion Papers - 2011

We study the properties of foreign exchange risk premiums that can explain the forward bias puzzle, defined as the tendency of high-interest rate currencies to appreciate rather than depreciate. These risk premiums arise endogenously from the no-arbitrage condition relating the term structure of...

Persistent link: https://www.econbiz.de/10009209825

130 years of fiscal vulnerabilities and currency crashes in advanced economies

Fratzscher, Marcel; Mehl, Arnaud; Vansteenkiste, Isabel - C.E.P.R. Discussion Papers - 2011

This paper investigates the empirical link between fiscal vulnerabilities and currency crashes in advanced economies over the last 130 years, building on a new dataset of real effective exchange rates and fiscal balances for 21 countries since 1880. We find evidence that crashes depend more on...

Persistent link: https://www.econbiz.de/10009324258

Can Oil Prices Forecast Exchange Rates?

Ferraro, Domenico; Rogoff, Kenneth; Rossi, Barbara - C.E.P.R. Discussion Papers - 2011

This paper investigates whether oil prices have a reliable and stable out-of-sample relationship with the Canadian/U.S dollar nominal exchange rate. Despite state-of-the-art methodologies, we find little systematic relation between oil prices and the exchange rate at the monthly and quarterly...

Persistent link: https://www.econbiz.de/10009359490

International Financial Adjustment

Gourinchas, Pierre-Olivier; Rey, Hélène - C.E.P.R. Discussion Papers - 2005

The Paper proposes a unified framework to study the dynamics of net foreign assets and exchange rate movements. We show that deteriorations in a country’s net exports or net foreign asset position have to be matched either by future net export growth (trade adjustment channel) or by future...

Persistent link: https://www.econbiz.de/10005662073

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