Library Header Image
LSE Research Online LSE Library Services

The exchange rate and its fundamentals in a complex world

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

Full text not available from this repository.

Identification Number: 10.1111/j.1467-9396.2005.00523.x


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:
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: 20 Feb 2021 03:53

Actions (login required)

View Item View Item