Bandwagon Effects or Rational Expectations in the Exchange Rate?

Vasumathi Vijayraghavan
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Vasumathi Vijayraghavan: University of Paris-Dauphine

Chapter 21 in Open-Economy Macroeconomics, 1993, pp 400-407 from Palgrave Macmillan

Abstract: Abstract The focus of financial market research in the 1970s was the testing of efficiency. Since then the focus has shifted to examining risk premia or various manifestations of inefficiency in the strict sense. Recent developments have also focused on irrationalities such as chaos, bubbles and fads, emphasising the heterogeneousness of market participants which manifests itself primarily in informational inequalities. For instance, whether the heterogeneity manifests itself, as in the exchange market, in the dichotomy between chartists and fundamentalists or through feedback traders and ‘rational traders’, the difference comes down to differences between information sets.1

Keywords: Exchange Rate; Forecast Error; Real Exchange Rate; Exchange Market; Rational Expectation (search for similar items in EconPapers)
Date: 1993
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DOI: 10.1007/978-1-349-12884-6_21

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