Expectations, disagreement and exchange rate pressure

Joscha Beckmann and Tjeerd Boonman

Economics Letters, 2022, vol. 212, issue C

Abstract: This paper provides a novel look on the relationship between survey-based exchange rate expectations and exchange market pressure. Using monthly data for twelve emerging countries from 2003 until 2020, we show that exchange market pressure often increases disagreement among exchange rate forecasters, especially for currencies with high trading volume. This offers an explanation for increasing volatility in the spot rate through expectations after a surge in exchange market pressure. We also find that forecasters take exchange rate overshooting patterns into account. Periods of exchange rate pressure are succeeded by the belief that the domestic currency appreciates against the US dollar.

Keywords: Expectations; Exchange Market Pressure; Disagreement (search for similar items in EconPapers)
JEL-codes: F31 F37 G17 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:212:y:2022:i:c:s0165176521004535

DOI: 10.1016/j.econlet.2021.110205

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