NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Floating Exchange Rates, Expectations and New Information

Sebastian Edwards

NBER Working Paper No. 1064 (Also Reprint No. r0458)
Issued in 1983
NBER Program(s):   ITI   IFM

This paper analyzes the relationship between forward exchange rates,future spot rates and new information. A stochastic model of exchangerate determination is used to formally show how unanticipated changes in the exchange rate determinants (or "news") affect the spot rate. The empirical analysis indicates that "new information" plays an important role in explaining the market forecasting error, or difference between the spot rate and the forward rate, determined in the previous period.

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Document Object Identifier (DOI): 10.3386/w1064

Published: Edwards, Sebastian Edwards. "Floating Exchange Rates, Expectations and New Information." Journal of Monetary Economics, Vol. 11, No. 3. (May 1983), pp . 321-336. citation courtesy of

 
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