The empirical evidence of the Purchasing Power Parity (PPP) Hypothesis in the exchange rate market is examined by means of fractional integration analysis.

Problems faced by empirical studies of the purchasing power parity (PPP) hypothesis are: the choice between a multilateral and a bilateral approach, the choice of the appropriate price index and the problem of simultaneous determination of prices and exchange rates. In the present paper, we...

Traditional macroeconomic models fail to explain short- and medium-term volatility of foreign exchange rates. Following the new strand of market microstructure approaches to the problem, we model the dynamic optimization problem of a monopolistic market maket who faces uncertainty about some...

We assess the phenomenon of excess volatility in intra-day foreign exchange markets using a market microstructure approach. Introducing different degrees of competition in the forex market and applying different learning mechanisms we are able to give a rationale for traders' use of rather...

This paper discusses some of the issues related to the determination of the future behavior of euro exchange rates. It considers the impact of European-wide productivity and velocity disturbances on 'portfolio' diversification in Europe, under a single currency.