On the Statistical Properties of Floating Exchange Rates: A Reassessment of Recent Experience and Literature

International Monetary Fund

No 1988/011, IMF Working Papers from International Monetary Fund

Abstract: The paper reviews the statistical behavior of major currency exchange rates during 1975-86. A close inspection indicates small deviations of recent exchange rate behavior from random walks and some systematic movements in monthly data, possibly corresponding to the relatively infrequent arrivals of information concerning major macroeconomic variables. The distributional characteristics of exchange rate changes differ between daily and monthly data and thus imply the possible presence of heterogeneity in underlying factors. These and other observations suggest care in the use of daily data in empirical work and the usefulness of explicit modeling of heterogeneity among market participants and in information structure.

Keywords: WP; U.S. dollar; pound sterling; standard deviation; market efficiency; forward market; risk neutrality; Canadian dollar; Exchange rates; Exchange rate adjustments; Currency markets; Exchange rate analysis; Forward exchange rates; Global (search for similar items in EconPapers)
Pages: 38
Date: 1988-01-01
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Citations: View citations in EconPapers (2)

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