An Essay on the Foreign Exchange Rate Expectations in Brazil

Wagner Gaglianone and Ana Luiza Louzada Pereira ()
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Ana Luiza Louzada Pereira: EPGE/FGV e Petrobras - Petróleo Brasileiro S.A.

Brazilian Review of Finance, 2005, vol. 3, issue 1, 55-100

Abstract: This article analyses the behavior of the Brazilian exchange rate (Real/US dollar) and the corresponding values forecasted by the market agents, from 2001 (November) to 2004 (may). We use the data-base of the Brazilian Central Bank, called Sistema de Expectativas de Mercado, which has been created in 1999. We evaluate the rational expectations hypothesis (REH) for the exchange rate market, comparing the mean value predicted by some Brazilian financial institutions with the daily exchange rate that has really occurred (PTAX). The particular arrangement of the data-base allows us to make the analysis in two different ways: with fixed-event forecasts. The main result suggests that the Brazilian exchange rate market support the weak form of the REH, for short horizons of forecasting.

Keywords: exchange rate; volatility; rational expectations (search for similar items in EconPapers)
JEL-codes: E37 F31 (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:3:y:2005:i:1:p:55-100

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