Exchange rate theory
Subtitle: chaotic models of foreign exchange markets
By: Paul De Grauwe, Hans Dewachter, and Mark Embrechts.
Contributors: Dewachter, Hans.; Embrechts, Marc.
Publisher: Blackwell
Published: 1993
Place of publication: Oxford, UK; Cambridge, Mass., USA
Language: eng
Number of pages: 273
Subjects: Foreign exchange rates -- Econometric models.
Description: "Exchange Rate Theory presents a novel and elegant theory to explain the excessive variability of foreign exchange rate returns. The theory is novel in the sense that it focuses on interaction between market agents as the primary source of the variability in those speculative prices. It is shown that simple interactions between market participants using different information is sufficient to generate deterministic chaos." "In the first part of this book the authors survey existing exchange rate theories and ask whether these theories are useful in explaining actual exchange rate movements. They demonstrate that the 1970s were characterized by the belief that exchange rates could be understood by an analysis of the fundamentals (inflation rates, interest rates and monetary policy). Subsequently, this belief has all but disappeared but researchers have been content to analyze the statistical properties of exchange rates, abandoning the theory and the models." "The second part of the book uses chaos theory to construct an innovative framework for the understanding of exchange markets. These models, which integrate fundamentalism and chartism, create complex exchange rate movements which appear to be random. These models are used to explain several of the anomalies observed in exchange rate markets and to evaluate the possibility of exchange rate prediction."--BOOK JACKET.
Notes: Includes bibliographical references (p. [258]-265) and index.