FOREIGN EXCHANGE RATE EXPECTATIONS: SURVEY AND SYNTHESIS

Ron Jongen, Willem Verschoor and Christian Wolff

Journal of Economic Surveys, 2008, vol. 22, issue 1, 140-165

Abstract: Abstract This paper reviews the empirical literature on foreign exchange rate expectations. Prominent issues are the forward premium puzzle, expectations formation in financial markets, heterogeneity of expectations, market microstructure, time‐varying risk premiums and forecast performance. Although much has been learned in each field, this survey highlights the areas of research in which our understanding of the mechanism of exchange rate expectations is still incomplete. Our survey suggests that both irrational expectations and time‐varying risk premiums account for the forward discount anomaly, that long‐term expectations reverse towards their long‐run equilibrium values and that heterogeneous behaviour of market participants has the potential of explaining some of the empirical regularities in the international finance literature.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (51)

Downloads: (external link)
https://doi.org/10.1111/j.1467-6419.2007.00523.x

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jecsur:v:22:y:2008:i:1:p:140-165

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0950-0804

Access Statistics for this article

More articles in Journal of Economic Surveys from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().