Persistence in the Variability of Daily Exchange Rates
Summary:
Rational speculation in foreign exchange trading is often assumed to dampen exchange rate fluctuations by bringing the market back to fundamentals. Nevertheless, information congestion provides incentives for traders to follow positive feedback strategies which result in persistent and volatile exchange rate behavior by magnifying the impact of exogenous shocks. Empirical evidence is presented which is consistent with such autocatalytic effects.
Series:
Working Paper No. 1991/104
Subject:
Currencies Currency markets Exchange rate adjustments Exchange rate analysis Exchange rates Financial markets Foreign exchange Money
English
Publication Date:
October 1, 1991
ISBN/ISSN:
9781451852738/1018-5941
Stock No:
WPIEA1041991
Pages:
26
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