Agents' Rationality and the CHF/USD Exchange Rate, Part II

Hermann Garbers

No 169, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: In Part I the author was concerned with modeling the monthly logarithmic CHF/USD exchange rate, ''s''. He rejected a model proposed by B.T. McCallum. Searching for a more appropriate framework a story by P. De Grauwe was introduced, bringing complex cognitive processes and social practices into the picture. This paper treats again P. De Grauwe's story, supplements it and embedds it into a broader setting showing its links to a subtle concept of agents' rationality. We derive a testable implication of this approach. Although the test result is negative, it will be helpful for the misspecification analysis of B.T. McCallum's model (applied to ''s''), which will finally be presented in Part III of this paper..

Keywords: General; Economics; and; Methodology (search for similar items in EconPapers)
JEL-codes: A1 B4 C91 D8 F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn
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