de Grauwe, Paul and Grimaldi, Marianna (2005) The exchange rate and its fundamentals in a complex world. Review of International Economics, 13 (3). pp. 549-575. ISSN 0965-7576
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Identification Number: 10.1111/j.1467-9396.2005.00523.x
Abstract
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, the model explains the “exchange rate determination” and PPP puzzles, the excess volatility, and fat tails in exchange rate returns.
| Item Type: | Article |
|---|---|
| Official URL: | http://onlinelibrary.wiley.com/journal/10.1111/%28... |
| Additional Information: | © 2005 Blackwell Publishing |
| Divisions: | European Institute |
| Subjects: | H Social Sciences > HG Finance |
| JEL classification: | F - International Economics > F3 - International Finance > F31 - Foreign Exchange |
| Date Deposited: | 05 Oct 2012 11:07 |
| Last Modified: | 13 Sep 2024 22:00 |
| URI: | http://eprints.lse.ac.uk/id/eprint/46583 |
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