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Fundamental and non-fundamental equilibria in the foreign exchange market : a behavioural finance framework
De Grauwe, Paul (contributor); Dieci, Roberto (contributor);  … - 2005
which bubbles and crashes occur at unpredictable moments. We contrast these ʺbehaviouralʺ bubbles with ʺrationalʺ bubbles. …
Persistent link: https://www.econbiz.de/10002749785
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Market depth, leverage, and speculative bubbles
Enders, Zeno; Hakenes, Hendrik - 2017
We develop a model of rational bubbles based on leverage and the assumption of an imprecisely known maximum market size … lend to traders with limited liability in a bubble is endogenous. Bubbles reduce welfare of future investors. We provide … general conditions for the possibility of bubbles depending on uncertainty about market size, traders' degree of leverage and …
Persistent link: https://www.econbiz.de/10011780495
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Non-linearities in the relation between the exchange rate and its fundamentals
Altavilla, Carlo (contributor); De Grauwe, Paul (contributor) - 2005
This paper investigates the relationship between the euro-dollar exchange rate and its underlying fundamentals. First, we develop a simple theoretical model in which chartists and fundamentalists interact. This model predicts the existence of different regimes, and thus nonlinearities in the...
Persistent link: https://www.econbiz.de/10003202226
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The impact of FX central bank intervention in a noise trading framework
Beine, Michel (contributor); De Grauwe, Paul (contributor);  … - 2005
In this paper we investigate the effects of central bank interventions (CBI) in a noise trading model with chartists and fundamentalists. We first estimate a model in which chartists extrapolate past returns and fundamentalists forecast a mean reverting dynamics of the exchange rate towards a...
Persistent link: https://www.econbiz.de/10003113337
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Bubbles in hybrid markets : how expectations about algorithmic trading affect human trading
Farjam, Mike; Kirchkamp, Oliver - 2015
Bubbles are omnipresent in lab experiments with asset markets. Most of these experiments were conducted in environments … smaller bubbles if human traders expect algorithmic traders to be present. …
Persistent link: https://www.econbiz.de/10011392621
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Bubbles and crashes in a behavioural finance model
De Grauwe, Paul; Grimaldi, Marianna - 2004
which bubbles and crashes occur at unpredictable moments. We contrast these behavioural bubbles with rational bubbles. …
Persistent link: https://www.econbiz.de/10011401333
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Bank of England interest rate announcements and the foreign exchange market
Melvin, Michael; Saborowski, Christian; Sager, Michael; … - 2009
Since 1997, the Bank of England Monetary Policy Committee (MPC) has met monthly to set the UK policy interest rate. We examine evidence of systematic patterns in exchange rate movements on MPC days over the first decade of operation of the MPC. Daily data reveal significant differences in...
Persistent link: https://www.econbiz.de/10003831967
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Exchange rate forecasters' performance : evidence of skill?
McDonald, Ronald H.; Menkhoff, Lukas; Rebitzky, Rafael R. - 2009
This paper sheds new light on a long-standing puzzle in the international finance literature, namely, that exchange rate expectations appear inaccurate and even irrational. We find for a comprehensive dataset that individual forecasters' performance is skill-based. 'Superior' forecasters show...
Persistent link: https://www.econbiz.de/10003832110
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The crisis in the foreign exchange market
Melvin, Michael; Taylor, Mark P. - 2009
The financial crisis of 2007-2008 had major implications for the foreign exchange market. We review events and implications for exchange rates, volatility, returns to currency investing, and transaction costs. This blow-by-blowʺ narrative is intended to be a resource for researchers seeking a...
Persistent link: https://www.econbiz.de/10003861767
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Monetary policy, model uncertainty and exchange rate volatility
Markiewicz, Agnieszka - 2010
This paper proposes an explanation of the shifts in the volatility of exchange rate returns that relies on standard present value exchange rate models. Agents are uncertain about the true data generating model and deal with the model uncertainty by making inference on the models and their...
Persistent link: https://www.econbiz.de/10003937806