Grauwe, Paul De; Grimaldi, Marianna - In: Review of International Economics 13 (2005) 3, pp. 549-575
We develop a nonlinear exchange rate model with heterogeneous agents. Some agents adopt a "fundamentalist" forecasting rule, while others use a "chartist" forecasting rule. We show that the model is capable of explaining the empirical puzzles relating to exchange rate movements. In particular,...