Exchange Rate Economics : Where Do We Stand? (CESifo Seminar Series)

Book DescriptionRecent theoretical developments in exchange rate economics have led to important new insights into the functioning of the foreign exchange market. The simple models of the 1970s, which could not withstand empirical evaluation, have been succeeded by more complex models that draw on theoretical work in such areas as the microstructure of financial markets and open economy macroeconomics. Additionally, new and powerful econometric techniques allow researchers to subject exchange rates to stronger empirical analysis. This book discusses the divergent theoretical and empirical paradigms used today for setting and predicting exchange rates; the chapters reflect current debates in the field. Some chapters base their analyses on thetheoretical framework of representative and fully informed rational agents; others are grounded in the hetereogeneity of agents who use different and incomplete sets of information. Still other chapters analyze empirical data to...