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The Foreign Exchange Market : Theory and Econometric Evidence - Richard T. Baillie

The Foreign Exchange Market

Theory and Econometric Evidence

Paperback Published: 31st December 1990
ISBN: 9780521396905
Number Of Pages: 276

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This book provides an integrated approach to recent developments in the understanding of foreign exchange markets. It covers the theory of efficient markets as developed in finance, and the models used to explain the movements of exchange rates in macroeconomics. The authors deal with the econometric estimation and testing of different models and theories of the foreign exchange market and macro-economy.

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"This well written and sophisticated book reviews the theoretical and empirical literature concerned with the determination of exchange rates." Herbert G. Grubel, Journal of Economic Literature

List of figuresp. viii
List of tablesp. ix
Prefacep. xi
Exchange rate concepts, historical development and institutionsp. 1
Introductionp. 1
The international monetary system after the failure of Bretton Woodsp. 6
The historical debate over floatingp. 10
Exchange rate conceptsp. 15
Purchasing power parity (PPP) theory and real exchange ratesp. 16
Recent exchange rate behaviourp. 19
Graphical display of recent exchange rate behaviourp. 29
The theory of efficient marketsp. 39
Introductionp. 39
Alternative definitions of efficiencyp. 40
Martingale, sub-martingale and random walk modelsp. 44
Practical problems with the concept of an efficient marketp. 49
Consideration of riskp. 54
Theoretical models of exchange rate behaviourp. 62
Introductionp. 62
Purchasing power parityp. 64
The monetary modelp. 71
Dornbusch's sticky price monetary modelp. 75
The Portfolio Balance modelp. 80
Other variants of the monetary modelp. 83
Currency substitution modelsp. 85
Recent developments and concluding remarksp. 86
Appendixp. 91
Statistical analysis of exchange rates and tests of efficiencyp. 102
Introductionp. 102
Time series analysis of exchange ratesp. 102
Statistical tests of weak form efficiencyp. 115
Tests of weak form efficiency of exchange ratesp. 122
Tests of strong form efficiency of exchange ratesp. 127
The distribution of changes in the exchange ratep. 134
Volatility and conditional variance models of changes in the log of the exchange ratep. 137
Appendixp. 148
Interest rate parity, transactions costs and the modern theoryp. 150
Introductionp. 150
The interest rate parity theoryp. 150
Transactions costs and modifications to IRPTp. 152
The modern theory of forward exchangep. 157
Econometric testing of IRPTp. 159
The forward rate as a predictor of the future spot ratep. 162
Introductionp. 162
Interest rate parity and the relationship between spot and forward exchange ratesp. 162
Possible reasons for breakdown of UEEp. 166
Econometric tests of the UEE hypothesisp. 168
Single equation tests of the UEE hypothesis with overlapping datap. 176
Simultaneous equation tests of the UEE hypothesis with overlapping datap. 179
The role of news and the term structure of the forward premiump. 190
Introductionp. 190
The role of news in movements of the spot ratep. 190
Econometric approaches to estimating news equationsp. 193
Edwards additive news modelp. 196
Empirical results on newsp. 201
The term structure of the forward premiump. 204
Modelling the time varying risk premiump. 207
Estimation and testing of exchange rate modelsp. 219
Introductionp. 219
Purchasing power parityp. 220
Estimation of the monetary modelp. 222
Estimation of the monetary model under rational expectationsp. 229
Bibliographyp. 236
Indexp. 255
Table of Contents provided by Syndetics. All Rights Reserved.

ISBN: 9780521396905
ISBN-10: 0521396905
Audience: Professional
Format: Paperback
Language: English
Number Of Pages: 276
Published: 31st December 1990
Country of Publication: GB
Dimensions (cm): 23.37 x 15.39  x 1.8
Weight (kg): 0.43

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