Journal ArticleDOI
Testing for Bubbles in Exchange Markets: A Case of Sparkling Rates?
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In this article, the authors investigated the possibility that the observed deviations of major bilateral exchange rates from values implied by market fundamentals are a consequence of rational asset market bubbles and found that the bubble findings must be interpreted with care.Abstract:
This paper investigates the possibility that the observed deviations of major bilateral exchange rates from values implied by market fundamentals are a consequence of rational asset market bubbles. When a new econometric methodology for detecting asset market bubbles is used, the joint hypothesis of no bubbles and stable autoregressive processes for relative money supplies and real incomes is rejected for the dollar/deutsche mark and dollar/pound ratesusing monthly data over the period 1973-82. Additional tests for coefficient stability and for lack of cointegration between exchange rates and market fundamentals suggest that the bubble findings must be interpreted with care.read more
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Journal ArticleDOI
Jumps and Stochastic Volatility: Exchange Rate Processes Implicit in Deutsche Mark Options
TL;DR: In this paper, an efficient method was developed for pricing American options on stochastic volatility/jump-diffusion processes under systematic jump and volatility risk, and the parameters implicit in deutsche mark (DM) options of the model and various submodels were estimated over the period 1984 to 1991 via nonlinear generalized least squares, and tested for consistency with $/DM futures prices and the implicit volatility sample path.
Book
The Economics of Exchange Rates
TL;DR: In the last few decades exchange rate economics has seen a number of developments, with substantial contributions to both the theory and empirics of exchange rate determination as mentioned in this paper. But, while our understanding of exchange rates has significantly improved, a few challenges and open questions remain in the exchange rate debate, enhanced by events including the launch of the Euro and the large number of recent currency crises.
Posted Content
Exchange rates and fundamentals: Evidence on long-horizon predictability
TL;DR: In this paper, the effect of multiple-period changes in the log exchange rate on the deviation of the log nominal exchange rate from its 'fundamental value' was investigated. But the model was designed to account for small-sample bias and size distortion.
Book
The Microstructure Approach to Exchange Rates
TL;DR: In this paper, the authors focus on the economics of financial information and how microstructure tools help to clarify the types of information most relevant to exchange rates, and show how exchange-rate behavior previously thought to be particularly puzzling can be explained using the micro-structure approach.
ReportDOI
Order Flow and Exchange Rate Dynamics
TL;DR: In this paper, a new kind of macroeconomic determinant from the field of microstructure (order flow) is proposed to determine the price of the DM/$ spot market, and the model produces significantly better short-horizon forecasts than a random walk.
References
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Journal ArticleDOI
A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity
TL;DR: In this article, a parameter covariance matrix estimator which is consistent even when the disturbances of a linear regression model are heteroskedastic is presented, which does not depend on a formal model of the structure of the heteroSkewedness.
Journal ArticleDOI
Distribution of the Estimators for Autoregressive Time Series with a Unit Root
David A. Dickey,Wayne A. Fuller +1 more
TL;DR: In this article, the limit distributions of the estimator of p and of the regression t test are derived under the assumption that p = ± 1, where p is a fixed constant and t is a sequence of independent normal random variables.
Journal ArticleDOI
Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation
TL;DR: In this article, a new class of stochastic processes called autoregressive conditional heteroscedastic (ARCH) processes are introduced, which are mean zero, serially uncorrelated processes with nonconstant variances conditional on the past, but constant unconditional variances.
Journal ArticleDOI
Specification Tests in Econometrics
TL;DR: In this article, the null hypothesis of no misspecification was used to show that an asymptotically efficient estimator must have zero covariance with its difference from a consistent but asymptonically inefficient estimator, and specification tests for a number of model specifications in econometrics.
Book
Linear statistical inference and its applications
TL;DR: Algebra of Vectors and Matrices, Probability Theory, Tools and Techniques, and Continuous Probability Models.
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