TY  - JOUR
AU  - Ito,Takatoshi
TI  - Short-run and Long-run Expectations of the Yen/Dollar Exchange Rate
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4545
PY  - 1993
Y2  - November 1993
UR  - http://www.nber.org/papers/w4545
L1  - http://www.nber.org/papers/w4545.pdf
N1  - Author contact info:
Takatoshi Ito
Graduate School of Economics
University of Tokyo
7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
JAPAN
Tel: 81-3-5841-5608
Fax: 81-3-5841-5521
E-Mail: tito@e.u-tokyo.ac.jp
AB  - The survey data on the yen/dollar exchange rate, collected twice a month for eight years from 1985 to 1993, shows the following features.  First, the expected exchange rate changes in the short horizon (one month) are of the band-wagon type while the expected changes in the long horizon (three to six months) are of the mean- reversion type.  That is, foreign exchange traders infer from recent appreciations or depreciation that the recent change in the exchange rate will continue for a while, but the direction of changes will reverse, eventually.  Second, this result is robust for the entire sample period, which includes sub-periods of sharp yen appreciations and of relative calm, and with respect to different specifications. Third, the deviation from an equilibrium exchange rate does not yield a robust estimate in the regression of expectation formation. Although the history of the yen/dollar exchange rate fluctuations in the past two decades shows mean reversion over several years, they are not captured in the six-month expectations in the survey data.
ER  -