In this paper we propose a generalisation of the noise trader transmission mechanism to examine the impact of central bank intervention on exchange rates. Within a heterogeneous expectations exchange rate model intervention operations are supposed to provide support to either chartist or...

In this paper we provide evidence for Evans and Lyons' (2005b) model of an information aggregation process in FX markets using a German bank's end-user order flow from 2002 to 2003. Though customer order flow is unambiguously the vehicle incorporating non-public information into exchange rates...

Do financial market analysts use structural economic models when forecasting exchange rates? This is the leading question analysed in this paper. In contrast to other studies we use expectations data instead of observable variables. Therefore we analyse the implicit structural models forecasters...

The aim of this paper is to detect periods in which two currencies can be classified as being the'same' asset. Two currencies can be treated as the same asset if their exchange rates vis-à-vis the same base currency are cointegrated with a cointegration vector that is consistent with the...

This note examines how the DEM/USD rate and US short-term and long-term interest rates respond to the release of payroll announcements. In contrast to a recent paper by Edison (1997), who employs a linear econometric model, we test the influence of news by comparing the absolute values of the...

Economic theory provides two main explanations why changes in exchange rates can affect foreign direct investment (FDI). According to a first explanation, FDI reacts to exchange rate changes if there are information frictions on capital markets and if the investment by firms depends on their net...

This paper re-investigates the implications of monetary policy rules on changes in exchange rate, in a risk-adjusted, uncovered interest parity model with unrestricted parameters, emphasizing the importance of modeling market expectations of monetary policy. I use consensus forecasts as a proxy...

This paper attempts to model the nominal and real exchange rate for Ireland, relative to Germany and the UK from 1975 to 2003. It offers an overview of the theory of purchasing power parity (PPP), focusing particularly on likely sources of nonlinearity. Potential difficulties in placing the...

In this paper, a survey on theoretically expected and empirically proved impacts of exchange rate volatility is given. With regard to the West German unemployment, the effects of volatility are empirically analysed using three different volatility measures and four country groups. In...