Persistence in the Variability of Daily Exchange Rates

October 1, 1991

Preview Citation

Format: Chicago

George C. Tsibouris Persistence in the Variability of Daily Exchange Rates, (USA: International Monetary Fund, 1991) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Rational speculation in foreign exchange trading is often assumed to dampen exchange rate fluctuations by bringing the market back to fundamentals. Nevertheless, information congestion provides incentives for traders to follow positive feedback strategies which result in persistent and volatile exchange rate behavior by magnifying the impact of exogenous shocks. Empirical evidence is presented which is consistent with such autocatalytic effects.

Subject: Currencies, Currency markets, Exchange rate adjustments, Exchange rate analysis, Exchange rates, Financial markets, Foreign exchange, Money

Keywords: Currencies, Currency markets, Deutsche mark, Dollar expectation, Exchange rate adjustments, Exchange rate analysis, Exchange rates, Larger-than-average yen depreciation, Math, Pound sterling, Sell-off effect, U.S. dollar, WP

Publication Details

Pages:

26
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1991/104
Stock No:

WPIEA1041991
ISBN:

9781451852738
ISSN:

1018-5941

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