This thesis consists of four papers, of which paper 1 and 4 are co-written with Mikael Bask. Paper [1] <p> implements chartists trading in a sticky-price monetary model for determining the exchange rate. It is <p> demonstrated that chartists cause the exchange rate to "overshoot the overshooting equilibrium" of a <p> sticky-price monetary model. Chartists base their trading on a short-long moving average. The <p> importance of technical trading depends inversely on the time horizon in currency trade. The exchange <p> rate's perfect foresight path near long-run equilibrium is derived and it is demonstrated that the shorter <p> the time horizon, the greater the exchange rate overshooting. <p> The aim of Paper [2] is to see how the dynamics of the basic target zone model changes when <p> chartists and fundamentalists are introduced. Chartists use technical trading and the relative importance <p> of technical and fundamental analyses depend on the time horizon in currency trade. The model also <p> includes realignment expectations, which increase with the weight of chartists. The introduction of <p> chartists may significantly reduce and reverse, the so-called "honeymoon effect" of a fully credible <p> target zone. Further, chartists may cause the correlation between the exchange rate and the <p> instantaneous interest rate differential to become either positive or negative. <p> Using a chartist-fundamentalist set-up, Paper [3] derives the effects on the current exchange rate of <p> central bank intervention. Fundamentalists have rational expectations and chartists use so called <p> support and resistance levels in their trading. This technique results in chartists having both <p> bandwagon expectations and regressive expectations. Chartists may enhance or suppress the effect of <p> intervention depending on their expectations. The results indicate that a chartist channel exists. <p> The aim of Paper [4] is threefold; (i) to investigate if there is a unique rational expectations <p> equilibrium (REE) in a new Keynesian macroeconomic model augmented with technical trading, (ii), <p> to investigate if the unique REE is adaptively learnable and, (iii), to investigate if this unique and <p> adaptively learnable REE is desirable in an inflation rate targeting regime. The monetary authority is <p> using a Taylor rule when setting the interest rate. A main conclusion is that a robust Taylor rule <p> implies that the monetary authority should increase (decrease) the interest rate when the CPI inflation <p> rate increases (decreases) and when the currency gets stronger (weaker).
