Floating Exchange Rates, Expectations and New Information

Sebastian Edwards

No 1064, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes the relationship between forward exchange rates,future spot rates and new information. A stochastic model of exchangerate determination is used to formally show how unanticipated changes in the exchange rate determinants (or "news") affect the spot rate. The empirical analysis indicates that "new information" plays an important role in explaining the market forecasting error, or difference between the spot rate and the forward rate, determined in the previous period.

Date: 1983-01
Note: ITI IFM
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Citations: View citations in EconPapers (27)

Published as Edwards, Sebastian Edwards. "Floating Exchange Rates, Expectations and New Information." Journal of Monetary Economics, Vol. 11, No. 3. (May 1983), pp . 321-336.

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Journal Article: Floating exchange rates, expectations and new information (1983)
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