Exchange Rate Puzzles: A Review of the Recent Theoretical and Empirical Developments
Thabo Mokoena (),
Rangan Gupta () and
Renee van Eyden ()
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Thabo Mokoena: South African Reserve Bank, Pretoria
No 200827, Working Papers from University of Pretoria, Department of Economics
This paper presents a comprehensive literature review of the theoretical and empirical developments that have taken place over the last two decades in an attempt to address the exchange rate puzzles. Specifically, we discuss non-linear and Bayesian econometric techniques, Dynamic General Equilibrium models, and the Market Microstructure approach that has been designed to address three exchange rate puzzles, namely, the Purchasing Power Parity (PPP) puzzle, the exchange rate disconnect puzzle and the exchange rate determination puzzle. We conclude that the exchange rate puzzles are likely to be less puzzling, if researchers decide to move to non-linear econometric frameworks and microfounded general equilibrium models.
Keywords: Dynamic General Equilibrium Models; Exchange Rate Puzzles; Non-Linear and Bayesian Econometric Models (search for similar items in EconPapers)
JEL-codes: C1 C4 F3 F4 (search for similar items in EconPapers)
Pages: 36 pages
New Economics Papers: this item is included in nep-cba, nep-dge and nep-opm
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Journal Article: Exchange Rate Puzzles: A Review of the Recent Theoretical and Empirical Developments (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:200827
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