Using annual data spanning two centuries for dollar-sterling and franc-sterling real exchange rates, we find strong evidence of mean-reverting real exchange rate behavior. Using simple, stationary, autoregressive models estimated on prefloat data, we easily outperform nonstationary real exchange...

We survey the literature on the two main views of exchange rate determination that have evolved since the early 1970s: the monetary approach to the exchange rate (in flex-price, sticky-price and real interest differential formulations) and the portfolio balance approach. We then go on to discuss...

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...

Though unambiguously outperforming all other financial markets in terms of liquidity, foreign exchange trading is still performed in opaque and decentralized markets. In particular, the two-tier market structure consisting of a customer segment and an interdealer segment to which only market...

This paper applies nonlinear econometric models to empirically investigate the effectiveness of the Reserve Bank of Australia (RBA) exchange rate policy. First, results from a STARTZ model are provided revealing nonlinear mean reversion of the Australian dollar exchange rate in the sense that...

Although the ERM II rules allow the Danish krone to fluctuate against the euro within an official target zone of 4.5%, most of the time the exchange rate has remained in a narrow range around its unconditional mean. Estimating a Smooth Transition Autoregression Target Zone (STARTZ) model...