Cookies?
Library Header Image
LSE Research Online LSE Library Services

Heterogeneity of agents, transactions costs and the exchange rate

de Grauwe, Paul and Grimaldi, Marianna (2005) Heterogeneity of agents, transactions costs and the exchange rate. Journal of Economic Dynamics and Control, 29 (4). pp. 691-719. ISSN 0165-1889

Full text not available from this repository.

Abstract

We develop a model of the exchangerate that has two features. First, there are non-linearities that arise from the existence of transactioncosts in goods markets. Second, the model assumes heterogeneous agents who use simple forecasting rules, the ‘fitness’ of which is then controlled ex post by checking their profitability, and by switching to the more profitable rules. This model is capable of reproducing the empirical puzzles observed in exchange markets (disconnect puzzle, excess volatility, fat tails, volatility clustering). We analyse some policy implications of this type of modelling of the exchangerate.

Item Type: Article
Official URL: http://www.journals.elsevier.com/journal-of-econom...
Additional Information: © 2005 Elsevier
Library of Congress subject classification: H Social Sciences > HG Finance
Journal of Economic Literature Classification System: F - International Economics > F3 - International Finance > F31 - Foreign Exchange
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
Sets: Departments > European Institute
Collections > Economists Online
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 05 Oct 2012 10:46
URL: http://eprints.lse.ac.uk/46577/

Actions (login required)

Record administration - authorised staff only Record administration - authorised staff only