Fundamental And Non Fundamental Equilibria In The Foreign Exchange Market
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Fundamental And Non Fundamental Equilibria In The Foreign Exchange Market A Behavioural Finance Framework
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Author : Paul De Grauwe (econoom)
language : en
Publisher:
Release Date : 2005
Fundamental And Non Fundamental Equilibria In The Foreign Exchange Market A Behavioural Finance Framework written by Paul De Grauwe (econoom) and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with categories.
Fundamental And Non Fundamental Equilibria In The Foreign Exchange Market
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Author : Paul De Grauwe
language : en
Publisher:
Release Date : 2005
Fundamental And Non Fundamental Equilibria In The Foreign Exchange Market written by Paul De Grauwe and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with categories.
The Exchange Rate In A Behavioral Finance Framework
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Author : Paul De Grauwe
language : en
Publisher: Princeton University Press
Release Date : 2018-06-05
The Exchange Rate In A Behavioral Finance Framework written by Paul De Grauwe and has been published by Princeton University Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-06-05 with Business & Economics categories.
This book provides an alternative view of the workings of foreign exchange markets. The authors' modeling approach is based on the idea that agents use simple forecasting rules and switch to those rules that have been shown to be the most profitable in the past. This selection mechanism is based on trial and error and is probably the best possible strategy in an uncertain world, the authors contend. It creates a rich dynamic in the foreign exchange markets and can generate bubbles and crashes. Sensitivity to initial conditions is a pervasive force in De Grauwe and Grimaldi's model. It explains why large exchange-rate changes and volatility clustering occur. It also has important implications for understanding how the news affects the exchange rate. De Grauwe and Grimaldi conclude that news in fundamentals has an unpredictable effect on the exchange rate. Sometimes, they maintain, it alters the exchange rate considerably; at other times it has no effectwhatsoever. The authors also use their model to analyze the effects of official interventions in the foreign exchange market. They show that simple intervention rules of the "leaning-against-the-wind" variety can be effective in eliminating bubbles and crashes in the exchange rate. They further demonstrate how, quite paradoxically, by intervening in the foreign exchange market the central bank makes the market look more efficient. Clear and comprehensive, The Exchange Rate in a Behavioral Finance Framework is a must-have for analysts in foreign exchange markets as well as students of international finance and economics.
Fundamental Determinants Of Exchange Rates
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Author : Jerome L. Stein
language : en
Publisher: Clarendon Press
Release Date : 1998-04-30
Fundamental Determinants Of Exchange Rates written by Jerome L. Stein and has been published by Clarendon Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 1998-04-30 with Business & Economics categories.
Existing models fail to explain the large fluctuations in the real exchange rates of most currencies over the past twenty years. The Natural Real Exchange Rate approach (NATREX) taken here offers an alternative paradigm to those which focus on short-run movements of nominal eschange rates, purchasing power parity of the representative agent intertemporal optimization models. Yet it is also neo-classical in its stress upon the accepted fundamentals driving a real economy. It concentrates on the real exchange rate, and explains medium- tolong-run movements in equilibrium real exchange rates in terms of fundamental variables: the productivity of capital and social (public plus private) thrift at home and abroad. The NATREX approach is a family of growth models, each tailored to the characteristics of the countries considered. The authors explain the real international value of the US dollar relativ to the G10 countries, and the US current account. These are two large economies. The model is also applied to small economies, where it explains the real value of the Australian dollar and the Latin American currencies relative to the US dollar. The model is relevant for developing countries where the foreign debt is a concern. Finally, it is applied to two medium-sized economies to explain the bilateral exchange rate between the French franc and the Deutsche Mark. The authors demonstrate both the promise of the NATREX model and its applicability to economies large and small. Alongside the analysis, econometrics, and technical details of these case studies, the introductory chapter explains in accessible terms the rationale behind the approach. The mix of theory and empirical evidence makes this book relevant to academics and advanced graduate students, and to central banks, ministries of finance, and those concerned with the foreign debt of developing countries.
Noise Trading And Exchange Rate Regimes
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Author : Olivier Jeanne
language : en
Publisher:
Release Date : 1999
Noise Trading And Exchange Rate Regimes written by Olivier Jeanne and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999 with Foreign exchange categories.
Both the literature and new empirical evidence show that exchange rate regimes differ primarily by the noisiness of the exchange rate, not be measurable macroeconomic fundamentals. This motivates a theoretical analysis of exchange rate regimes with noise traders. The presence of noise traders can lead to multiple equilibria in the foreign exchange market. The entry of noise traders both create and share the risk associated with exchange rate volatility. In such circumstances, monetary policy can be used to lower exchange rate volatility without altering macroeconomic fundamentals.
Exchange Rate Determination Puzzle Long Run Behavior And Short Run Dynamics
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Author : Falkmar Butgereit
language : en
Publisher: diplom.de
Release Date : 2009-07-02
Exchange Rate Determination Puzzle Long Run Behavior And Short Run Dynamics written by Falkmar Butgereit and has been published by diplom.de this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-07-02 with Business & Economics categories.
Inhaltsangabe:Introduction: As the foreign exchange rate market operates twenty-four hours a day and seven days a week it can be described as a global marketplace trading in continuous time. The importance of this market place on weal and woe of economies and agents cannot be overestimated. Long lasting disputes about exchange rate over- and under-evaluation between countries (as most prominently the case between China and the USA) and its implications for international trade, growth rates of economies, unemployment levels, financial money flows, and so forth illustrate this point. As reported by the Bank of International Settlement in its triennial Central Bank Survey 2007, covering 54 countries and jurisdictions, the daily average foreign exchange turnover as of April 2007 has reached a mind-staggering $3.21 trillion. This amount marks an increase of 69 percent compared to the $1.97 trillion three years earlier and highlights the still increasing importance of the exchange rate markets. The U.S. dollar is by far the most important currency as it is involved in 86 percent of all transactions amounting to some $2.7 trillion per day. This is by far bigger than the volume of U.S. international trade in goods and services which for the month April 2007 amounted to (imports + exports) $317.5 billion.1 Indeed, only 17 percent of exchange market turnover has been reported to occur with non-financial customer counterparties, while 43 percent of transactions occur between reporting dealers (i.e. the interbank market) and 40 percent occur between reporting and non-reporting financial institutions (e.g. hedge funds, mutual funds, pension funds, insurance companies). Accordingly, more than 2/3 of the turnover was traded as derivatives such as foreign exchange swaps, outright forwards, or options, while only 1/3 constituted spot rate transactions. These are important facts to consider when talking about forces of exchange rate determination. On ground of these figures one may reasonably explain why old-fashion standard models like the monetary model or purchasing power parity may only hold in the very long run and exchange rate movements may be much more subject to trades based on heterogeneous expectations incurred by investors, speculators and market makers. Particularly at the short-run exchange rates exhibit considerably greater volatility than macroeconomic time series leaving an impression of noisy and chaotic behavior. Throughout this work it [...]
Equilibrium Exchange Rates
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Author : Ronald MacDonald
language : en
Publisher: Springer Science & Business Media
Release Date : 1999-07-31
Equilibrium Exchange Rates written by Ronald MacDonald and has been published by Springer Science & Business Media this book supported file pdf, txt, epub, kindle and other format this book has been release on 1999-07-31 with Business & Economics categories.
How successful is PPP, and its extension in the monetary model, as a measure of the equilibrium exchange rate? What are the determinants and dynamics of equilibrium real exchange rates? How can misalignments be measured, and what are their causes? What are the effects of specific policies upon the equilibrium exchange rate? The answers to these questions are important to academic theorists, policymakers, international bankers and investment fund managers. This volume encompasses all of the competing views of equilibrium exchange rate determination, from PPP, through other reduced form models, to the macroeconomic balance approach. This volume is essentially empirical: what do we know about exchange rates? The different econometric and theoretical approaches taken by the various authors in this volume lead to mutually consistent conclusions. This consistency gives us confidence that significant progress has been made in understanding what are the fundamental determinants of exchange rates and what are the forces operating to bring them back in line with the fundamentals.
Exchange Rate Economics
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Author : Ronald MacDonald
language : en
Publisher: Taylor & Francis
Release Date : 2007-03-12
Exchange Rate Economics written by Ronald MacDonald and has been published by Taylor & Francis this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-03-12 with Business & Economics categories.
First published in 2007. Exchange Rate Economics: Theories and Evidence is the second edition of Floating Exchange Rates: Theories and Evidence, and builds on the successful content and structure of the previous edition, but has been comprehensively updated and expanded to include additional literature on the determination of both fixed and floating exchange rates. Core topics covered include: • the purchasing power parity hypothesis and the PPP puzzle; • the monetary and portfolio-balance approaches to exchange rates; • the new open economy macroeconomics approach to exchange rates; and • the determination of exchange rates in target zone models and speculative attack models. Exchange Rate Economics: Theories and Evidence also includes extensive discussion of recent econometric work on exchange rates with a particular focus on equilibrium exchange rates and measuring exchange rate misalignment, as well as discussion on the non-fundamentals-based approaches to exchange rate behaviour, such as the market microstructure approach. The book will appeal to academics and postgraduate students with an interest in all aspects of international finance and will also be of interest to practitioners concerned with issues relating to equilibrium exchange rates and the forecastability of currencies in terms of macroeconomic fundamentals.
Fundamental Determinants Of Exchange Rates
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Author : Jerome Leon Stein
language : en
Publisher: Oxford University Press, USA
Release Date : 1995
Fundamental Determinants Of Exchange Rates written by Jerome Leon Stein and has been published by Oxford University Press, USA this book supported file pdf, txt, epub, kindle and other format this book has been release on 1995 with Business & Economics categories.
It concentrates on the real exchange rate, and explains medium-to long-run movements in equilibrium real exchange rates in terms of fundamental variables: the productivity of capital and social (public plus private) thrift at home and abroad.
Three Essays In International Finance
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Author : Byong-Ju Lee
language : en
Publisher: Stanford University
Release Date : 2011
Three Essays In International Finance written by Byong-Ju Lee and has been published by Stanford University this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
This thesis consists of three essays on international finance. The first essay is "Exchange rates and Fundamentals". A new open interest rate parity condition that takes account of economic fundamentals is developed from stochastic discount factors (SDFs) of two countries. Through this parity condition, business cycles or fundamentals are linked to exchange rates. Key empirical findings from this parity condition are as follows. First, this model beats the random walk hypothesis: economic fundamentals explain exchange rate movements for high interest rate currencies. Exchange rates of low interest rate currencies act like a random walk because they are less correlated with fundamentals owing to their low risk. For example, U.S. business cycles explain the direction of changes in exchange rates against the dollar. The same thing is true for Japan. Second, this model resolves the forward premium puzzle: the forward premium puzzle is not a general characteristic as regarded in previous studies. It happens when the risk awareness of investors is low, during economic expansions and for low risk currencies. The second essay is "Carry Trade and Global Financial Instability". Carry trade, an opportunistic investment strategy that takes advantage of interest rate differential across countries, is identified the cause of the large-scale depreciations of peripheral currencies in the later half of 2008. A simultaneous equations model, which is derived from a conceptual partial equilibrium model for a local foreign exchange market, is estimated from a cross-sectional sample. The results suggest that the larger appreciation of the yen than the dollar was brought about by a lack of the local supply of the yen rather than a more severe crunch of yen credits. The third essay is "The Economic Origin of Letters of Credit". This essay discusses the economic origin of letters of credit, an instrument widely used in international trade. A game theoretical analysis shows that letters of credit improve efficiency in trade settlements, increasing returns in trade. A few notable facts on letters of credit are discussed. First, the new institution is adopted by merchant banks to maximize their profits and in the process, an improvement in efficiency of international transactions is obtained. Second, the organization established by the legacy institution, bills of exchange, played a critical role in adopting the new institution. Third, the legal enforcement is not essential in this economic institution. Finally, two drivers are identified that improve efficiency of transactions: concentration and projection.