Altavilla, Carlo and de Grauwe, Paul (2010) Non-linearities in the relation between the exchange rate and its fundamentals. International Journal of Finance and Economics, 15 (1). pp. 1-12. ISSN 1076-9307
Full text not available from this repository.Abstract
We develop a simple theoretical model in which chartists and fundamentalists interact. The model predicts the existence of different regimes, and thus non-linearities in the link between the exchange rate and its fundamentals. We test the model empirically by adopting a Markov-switching vector error correction model. The results suggest the presence of non-linear mean reversion in the nominal exchange rate process. The implications are that different sets of macroeconomic fundamentals act as driving forces of the exchange rates during different time periods.
| Item Type: | Article |
|---|---|
| Official URL: | http://onlinelibrary.wiley.com/journal/10.1002/%28... |
| Additional Information: | © 2010 John wiley & Sons |
| Divisions: | European Institute |
| Subjects: | H Social Sciences > HG Finance J Political Science > JZ International relations |
| JEL classification: | F - International Economics > F3 - International Finance > F31 - Foreign Exchange |
| Date Deposited: | 05 Oct 2012 14:17 |
| Last Modified: | 05 Jan 2024 19:18 |
| URI: | http://eprints.lse.ac.uk/id/eprint/46609 |
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