Exchange Rate Volatility: the Impact of Learning Behaviour and the Institutional Framework. A Market Microstructure Approach

N. Wuthe

Economics Working Papers from European University Institute

Abstract: Traditional macroeconomic models fail to explain short- and medium-term volatility of foreign exchange rates. Following the new strand of market microstructure approaches to the problem, we model the dynamic optimization problem of a monopolistic market maket who faces uncertainty about some fundamental parameter and whose foreign currency position has to be closed by the end of the day.

Keywords: EXCHANGE RATE; LEARNING (search for similar items in EconPapers)
JEL-codes: D83 F31 (search for similar items in EconPapers)
Pages: 102 pages
Date: 1999
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Persistent link: https://EconPapers.repec.org/RePEc:eui:euiwps:eco99/44

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