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Explaining Foreign Exchange Market Puzzles

The paper develops a flow model of the exchange rate with speculative capital flows integrated in a rigorous manner. The model is consistent with five foreign exchange market puzzles: (1) occasional discontinuous jumps in the exchange rate; (2) periodic short-term regimes of persistent appreciation/...

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Bibliographic Details
Main Author: Miller, Norman
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1999
Series:IMF Working Papers
Subjects:
Balance Of Trade
Investment
Finance
Return On Investment
Currency; Foreign Exchange
Trade Balance
Exports And Imports
Intangible Capital
International Economics
National Accounts
International Financial Markets
Currency Markets
Foreign Exchange
International Finance: General
Financial Markets
Saving And Investment
International Trade
Investments: General
Macroeconomics
Capacity
Foreign Exchange Market
Exchange Rates
Empirical Studies Of Trade
Capital
Finance: General
United States
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:The paper develops a flow model of the exchange rate with speculative capital flows integrated in a rigorous manner. The model is consistent with five foreign exchange market puzzles: (1) occasional discontinuous jumps in the exchange rate; (2) periodic short-term regimes of persistent appreciation/depreciation that can develop into a long swing; (3) the forward discount bias; (4) volatility clusters in the foreign exchange market that create conditional heteroskedasticity; and (5) the dual profitability of betting in the short run against any official foreign exchange intervention, and betting with the intervention in the long run
Physical Description:29 pages
ISBN:9781451844504

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