This paper presents a general equilibrium currency crisis model of the ’thirdgeneration’, in which the possibility of currency crises is driven by the in-terplay between private firms’ credit-constraints and nominal price rigidities.Despite our emphasis on microfoundations, the model remains...

Empirical evidence shows that macroeconomic fundamentals have little explanatory power for nominal exchange rates. On the other hand, the recent microstructure approach to exchange rates has shown that most exchange rate volatility at short to medium horizons is related to order flows. This...

There is widespread evidence of excess return predictability in financial markets. In this paper we examine whether this predictability is related to expectational errors. To consider this issue, we use data on survey expectations of market participants in the stock market, the foreign exchange...