Exchange Rate Behaviour: Are Fundamentals Important?  

Oleh:

MacDonald, Ronald

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Economic Journal (EBSCO) vol. 109 no. 459 (Nov. 1999), page 673-691.
Topik: Fundamentals; behaviour
Fulltext: 673.pdf (378.71KB)

Isi artikel

One of the most controversial issues in the international economics literature concerns the role of economic fundamentals in explaining exchange rate behaviour. We interpret this controversy as having three different aspects. The ®rst concerns the relationship between exchange rates and fundamentals in the `long-run'. The second, the usefulness of fundamentals in producing out-of-sample forecasts which dominate a random walk, and the third controversy concerns the relative importance of shocks to real and nominal fundamentals in explaining real exchange rate variability (this, as we shall see, is related to the ®rst). Controversies one and two, therefore, may be thought of as relating to the ®rst moment of exchange rate behaviour, while the third is associated with the second moment.

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