NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Foreign Exchange Rate Expectations: Micro Survey Data

Takatoshi Ito

NBER Working Paper No. 2679 (Also Reprint No. r1445)
Issued in September 1990
NBER Program(s):   ITI   IFM

This paper analyzes the panel data of bi-weekly surveys, conducted by the Japan Center for International Finance, on the yen/dollar exchange rate expectations of forty-four institutions for two years. There are three major findings in this paper. First, market participants are found to be heterogeneous. There are significant "individual effects" in their expectation formation. Second, many institutions are found to violate the rational expectation hypothesis. Third, forecasts with long horizons showed less yen appreciation than those with short horizons. Cross-equation constraints implied by the consistencyof the forecast term structure are strongly rejected in the data.

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Published: The American Economic Review, Vol. 80, No. 3, pp. 434-449, (June 1990), pp. 434-449

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