Chartists, Fundamentalists, and the Demand for Dollars

摘要: The careening path of the dollar in recent years has shattered more than historical records and financial health some speculators. It also helped to shatter faith economists' models determination exchange rates. We have understood for time that under conditions high international capital mobility, currency values will move sharply unexpectedly response new information. Even so, actual movements rates been puzzling two major respects. First, proportion rate changes we are able predict seems be, not just low, but zero. According rational expectations theory should be use our is correctly predicted by market participants. Yet neither based on economic fundamentals, nor simple series models, forecasts participants as reflected forward discount or survey data, seem better lagged spot rate. Second can explained even after fact, using contemporaneous macroeconomic variables, disturbingly low.