Information rigidities and exchange rate expectations

Joscha Beckmann and Stefan Reitz

Journal of International Money and Finance, 2020, vol. 105, issue C

Abstract: Sluggish adjustment of expectations to new information is rational in an environment characterized by information costs and signal-to-noise problems. This paper investigates the role of such information rigidities for exchange rate expectations using data from Consensus Economics for ten emerging and industrial economies from 1999 until 2015. Our results confirm the importance of rigidities and show that the inclusion of forecast updates largely accounts for otherwise detected biases in expectation errors. Moreover, we find little evidence for a systematic effect of fundamentals or uncertainty measures on exchange rate disagreement.

Keywords: Exchange rates; Information rigidities; Expectations; Disagreement (search for similar items in EconPapers)
JEL-codes: F31 F37 G17 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (8)

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Working Paper: Information Rigidities and Exchange Rate Expectations (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:105:y:2020:i:c:s0261560618301414

DOI: 10.1016/j.jimonfin.2020.102136

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