Exchange-rate Discounting

Gregor Smith

No 1248, Working Paper from Economics Department, Queen's University

Abstract: Economists often describe nominal exchange rates as forward-looking, so that they reflect discounted, expected, future fundamentals. This study applies a method for identifying the discount rate involved, without knowing or measuring fundamentals. Identificationarises from assumptions on the stochastic process followed by fundamentals, combined with nonlinearity arising from expected future regime changes. Two applications yield evidence against the present-value model in the form of discount rates which are negativeand statistically significant.

Keywords: floating exchange rates; regime switching (search for similar items in EconPapers)
JEL-codes: F32 G12 (search for similar items in EconPapers)
Pages: 11 pages
Date: 1995-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1248.pdf First version 1995 (application/pdf)

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Journal Article: Exchange-rate discounting (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1248

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