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
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 |
| 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 |
| Sets: | Departments > European Institute Collections > Economists Online |
| Date Deposited: | 05 Oct 2012 11:07 |
| URL: | http://eprints.lse.ac.uk/46583/ |
Actions (login required)
 |
Record administration - authorised staff only |
