TY  - JOUR
AU  - Jeanne,Olivier
AU  - Rose,Andrew K.
TI  - Noise Trading and Exchange Rate Regimes
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7104
PY  - 1999
Y2  - April 1999
UR  - http://www.nber.org/papers/w7104
L1  - http://www.nber.org/papers/w7104.pdf
N1  - Author contact info:
Olivier Jeanne
Department of Economics
Johns Hopkins University
454 Mergenthaler Hall
3400 N. Charles Street
Baltimore, MD 21218
Tel: 410/516-7604
Fax: 410/516-7600
E-Mail: ojeanne@jhu.edu

Andrew K. Rose
Haas School of Business Administration
University of California, Berkeley
Berkeley, CA 94720-1900
Tel: 510/642-6609
Fax: 510/642-4700
E-Mail: arose@haas.berkeley.edu
AB  - Both the literature and new empirical evidence show that exchange rate regimes differ primarily by the noisiness of the exchange rate, not be measurable macroeconomic fundamentals.  This motivates a theoretical analysis of exchange rate regimes with noise traders.  The presence of noise traders can lead to multiple equilibria in the foreign exchange market.  The entry of noise traders both create and share the risk associated with exchange rate volatility.  In such circumstances, monetary policy can be used to lower exchange rate volatility without altering macroeconomic fundamentals.
ER  -