Sources of fluctuations in real and nominal exchange rates

Article Abstract:

Real and nominal causes for both real and nominal exchange rate fluctuations are examined in the context of time series analysis. The autoregressive bivariate vector is constrained by the lack of a long-term effect of nominal disturbances on the real exchange rate. The results suggest that short- and long-term changes in both nominal and real exchange rates are caused mainly by real shocks. Thus, nominal exchange rate variation should likewise change relative prices across borders and lead to efficient resource allocation.

Economic aspects, Foreign exchange market

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Fixes: of the forward discount puzzle

Article Abstract:

The deviation from uncovered interest party, called the 'forward discount puzzle,' is investigated. Data from the European Monetary System (EMS) are used as basis to analyze the phenomenon. Results show that a significant portion of the forward discount puzzle disappears for fixed exchange rates. Fixed exchange rate data from the Exchange Rate Mechanism of the EMS show a typical slope coefficient of approximately +0.6, a figure significantly under the expected value of unity.

Research, Stock-exchange, Stock exchanges, Discounts (Sales)

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TESTING FOR THE ROLE OF SPECULATION IN THE FORWARD EXCHANGE MARKET: SOME PROBLEMS IF THERE ARE FISHERIAN EXPECTATIONS

Article Abstract:

A THEORETICAL EXAMINATION IS MADE OF THE ROLE OF SPECULATION AND ARBITRAGE ACTIVITIES IN THE FORWARD FOREIGN EXCHANGE MARKETS. PROBLEMS ASSOCIATED WITH FISHERIAN EXPECTATIONS ARE DISCUSSED. IT IS ARGUED THAT AS LONG AS THE FISHERIAN COMPONENT IS NOT INCLUDED IN THE EXPECTATION VARIABLE, THE ESTIMATION PROCEDURE WILL OVERSTATE THE ELASTICITY OF ARBITRAGE FUNDS.

Finance, Speculation, Foreign exchange futures

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