In this paper we propose a novel empirical extension of the standard market microstructure order flow model. The main idea is that heterogeneity of beliefs in the foreign exchange market can cause model instability and such instability has not been fully accounted for in the existing empirical...

This paper investigates the (break) stationarity null hypothesis using data for 25 interest rates with different maturities and risk characteristics in Canada and the US. In contrast to a large part of the literature, this paper reports strong empirical evidence in favour of the null hypothesis...

The large appreciation and depreciation of the US dollar in the 1980s stimulated an important debate on the usefulness of unit root tests in the presence of structural breaks. In this paper, we propose a simple model to describe the evolution of the real exchange rate. We then propose a more...

The breakdown of the Bretton Woods system and the adoption of generalized oating exchange rates ushered in a new era of exchange rate volatility and uncer- tainty. This increased volatility lead economists to search for economic models able to describe observed exchange rate behavior. The...

The breakdown of the Bretton Woods system and the adoption of generalised floating exchange rates ushered in a new era of exchange rate volatility and uncer­tainty. This increased volatility lead economists to search for economic models able to describe observed exchange rate behavior. In the...