EconPapers    
Economics at your fingertips  
 

The scapegoat theory of exchange rates: the first tests

Marcel Fratzscher, Dagfinn Rime, Lucio Sarno and Gabriele Zinna

Journal of Monetary Economics, 2015, vol. 70, issue C, 1-21

Abstract: The scapegoat theory of exchange rates (Bacchetta and van Wincoop, 2004, 2013) suggests that market participants may attach excessive weight to individual economic fundamentals, which are picked as “scapegoats”to rationalize observed currency fluctuations at times when exchange rates are driven by unobservable shocks. Using novel survey data that directly measure foreign exchange scapegoats for 12 exchange rates, we find empirical evidence that supports the scapegoat theory. The resulting models explain a large fraction of the variation and directional changes in exchange rates in sample, although their out-of-sample forecasting performance is mixed.

Keywords: Scapegoat; Exchange rates; Economic fundamentals; Survey data (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (54)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393214001354
Full text for ScienceDirect subscribers only

Related works:
Working Paper: The scapegoat theory of exchange rates: the first tests (2014) Downloads
Working Paper: The Scapegoat Theory of Exchange Rates: The First Tests (2013) Downloads
Working Paper: The Scapegoat Theory of Exchange Rates: The First Tests (2012) Downloads
Working Paper: The scapegoat theory of exchange rates: the first tests (2012) Downloads
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:eee:moneco:v:70:y:2015:i:c:p:1-21

DOI: 10.1016/j.jmoneco.2014.09.001

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2025-03-23
Handle: RePEc:eee:moneco:v:70:y:2015:i:c:p:1-21