In this paper we aim to improve existing empirical exchange rate models by accounting for uncertainty with respect to the underlying structural representation. Within a flexible Bayesian non-linear time series framework, our modeling approach assumes that different regimes are characterized by...

The purpose of this study is to estimate the effects of Real Effective Exchange Rate (REER) on Sudan trade balance (TB). The present situation is confusing for all in Sudan with discrepancies in market effective foreign currencies and government declared prices. For example, one US$ in the...

We investigate the relation between foreign exchange (FX) order flow and the forward bias. We outline a decomposition of the forward bias according to which a negative correlation between interest rate differentials and order flow creates a time-varying risk premium consistent with that bias....

Using ten years of FX transactions data we demonstrate that a large share of the FX forward discount bias can be accounted for by order flow. A simple microstructure-based decomposition suggests that order flow creates a timevarying risk premium that is correlated with the forward discount. The...

In the empirical literature, not much support is found for the uncovered interest parity. Especially with free floating exchange rates, the forward rate is a biased predictor of the future exchange rate. This phenomenon can both be explained by an absence of rational expectations or by risk...

This study tests several models of the currency risk premium, but does so using survey data on traders' forecasts to directly measure the expected excess return. Among those tested are UIP, CAPM, and the Imperfect Knowledge Economics (IKE) gap model, which respectively imply that the premium is...

This paper is designed to review the empirical literature on the excess returns puzzle: the difficulty encountered by standard risk premium models in accounting for relative returns in the foreign exchange market. Of particular interest are the studies using survey data to decompose ex post...

This paper tests the ex ante implications of Frydman and Goldberg's Imperfect Knowledge Economics (IKE) gap model in such a way as to overcome the endogeneity bias and data restrictions of previous work. The IKE gap model relates the expected excess return (measured here through survey data for...