We test whether the relationship between the nominal exchange rate and the news in its underlying fundamentals has non-linear features. In order to do so, we develop a Markov switching model and apply it to a sample of low and high inflation countries. The empirical analysis shows that for the...

We test whether the relationship between the nominal exchange rate and the news in its underlying fundamentals has non-linear features. In order to do so, we develop a Markov switching model and apply it to a sample of low and high inflation countries. The empirical analysis shows that for the...

We analyse the workings of a simple non-linear exchange rate model in which agents hold different beliefs about the underlying model. We distinguish between chartists and fundamentalists . The non-linearities in the model originate from transactions costs and from the existence of non-linear...

We analyse the workings of a simple non-linear exchange rate model in which agents hold different beliefs about the underlying model. We distinguish between "chartists" and "fundamentalists". The non-linearities in the model originate from transactions costs and from the existence of non-linear...

We test whether the relationship between the nominal exchange rate and the news in its underlying fundamentals has non-linear features. In order to do so, we develop a Markov switching model and apply it to a sample of low and high inflation countries. The empirical analysis shows that for the...

This paper compares two competing approaches to model foreign exchange market participants' behavior: statistical learning and fitness learning. These learning mechanisms are applied to a set of predictors: chartist and fundamentalist rules. We examine which of the learning approaches is best in...