This paper examines the hypothesis that the predictable components of U.K. shares and bonds are related to business conditions. Financial market variables, such as maturity and default premia, are constructed in an attempt to capture different components of business-conditions risk. The...

In this paper, the efficient markets view of the term structure of forward foreign exchange premia is tested for the interwar experience with floating exchange rates, using a vector autoregressive methodology. One novel feature of the paper is the use of data sampled more finely than the...

In this paper, some standard propositions pertaining to the formulation of foreign exchange market expectations are examined using a new survey database. The database has two novel features over such data used by other researchers. In particular, it consists of disaggregated survey responses for...

Using survey data, this paper investigates two theories concerning the consequences of unan ticipated increases in aM3, the broad U.K. monetary aggregate, over t he period 1981.10 to 1985.8. In order to decide whether market operat ors believe that monetary laxity will be reversed (the policy...

In this paper, a number of rationality tests are implemented using survey data on exchange rate expectations for four currencies (dollar-sterling, deutsche mark-dollar, yen-dollar, and Swiss franc-dollar). It is demonstrated, inter alia, that the survey expectations are biased, orthogonal to an...

In this paper, the intertemporal government budget constraint is implemented using a U.K. data base. In particular, the recently developed cointegration methodology is utilized to test whether the U.K. authorities engaged in bubble finance over the period 1961 to 1986. The authors' results are...