Floating Exchange Rates, Expectations and New Information
Working Paper 1064
DOI 10.3386/w1064
Issue Date
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.
Published Versions
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