UNSPECIFIED (2005) Viewpoint: Towards a solution to the puzzles in exchange rate economics: where do we stand? In: Annual Meeting of the Canadian-Economics-Association, Toronto, CANADA, JUN 04-06, 2004. Published in: CANADIAN JOURNAL OF ECONOMICS-REVUE CANADIENNE D ECONOMIQUE, 38 (3). pp. 673-708. ISSN 0008-4085.

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Abstract

This paper provides a selective overview of puzzles in exchange rate economics. We begin with the forward bias puzzle: high interest rate currencies appreciate when one might guess that investors would demand higher interest rates on currencies expected to fall in value. We then analyse the purchasing power parity puzzle: the real exchange rate displays no (strong) reversion to a stable long-run equilibrium level. Finally, we cover the exchange rate disconnect puzzle: the lack of a link between the nominal exchange rate and economic fundamentals. For each puzzle, we critically review the literature and speculate on potential solutions. JEL classification: F31

Item Type:	Conference Item (UNSPECIFIED)
Subjects:	H Social Sciences > HC Economic History and Conditions
Journal or Publication Title:	CANADIAN JOURNAL OF ECONOMICS-REVUE CANADIENNE D ECONOMIQUE
Publisher:	UNIV TORONTO PRESS INC
ISSN:	0008-4085
Official Date:	August 2005
Dates:	Date Event August 2005 UNSPECIFIED
Volume:	38
Number:	3
Number of Pages:	36
Page Range:	pp. 673-708
Publication Status:	Published
Title of Event:	Annual Meeting of the Canadian-Economics-Association
Location of Event:	Toronto, CANADA
Date(s) of Event:	JUN 04-06, 2004

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