Exchange Rate Expectations: A Survey of Survey Studies

Shinji Takagi

IMF Staff Papers, 1991, vol. 38, issue 1, 156-183

Abstract: The empirical literature on survey-based exchange rate expectations is briefly surveyed. The literature in general supports the presence of a nonzero risk premium and rejects the hypothesis of rational expectations. The crucial result is that, whereas short-run expectations tend to move away from some long-run "normal" values, long-run expectations tend to move back toward them. If this behavior of short-run expectations increases the volatility of exchange rate movements, there may be a basis for an official measure to minimize short-run exchange rate movements.

Date: 1991
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