In this study a regime switching approach is applied to estimate the chartist and fundamentalist (c&f) exchange rate model originally proposed by Frankel and Froot (1986). The c&f model is tested against alternative regime switching specifications applying likelihood ratio tests. Nested...

In this study a regime switching approach is applied to estimate the chartist and fundamentalist (c&f) exchange rate model originally proposed by Frankel and Froot (1986). The c&f model is tested against alternative regime switching specifications applying likelihood ratio tests. Nested...

In this paper we propose a generalisation of the noise trader transmission mechanism to examine the impact of central bank intervention on exchange rates. Within a heterogeneous expectations exchange rate model intervention operations are supposed to provide support to either chartist or...

In this paper we propose a generalisation of the noise trader transmission mechanism to examine the impact of central bank intervention on exchange rates. Within a heterogeneous expectations exchange rate model intervention operations are supposed to provide support to either chartist or...

We show that excess returns to the carry trade can be interpreted as compensation for foreign exchange dealers' capital risk. Given that the top market makers in foreign exchange are at the heart of the market's information aggregation process we also suggest that it is their marginal value of...

We show that excess returns to the carry trade can be interpreted as compensation for foreign exchange dealers' capital risk. Given that the top market makers in foreign exchange are at the heart of the market's information aggregation process we also suggest that it is their marginal value of...

The target zone model of Krugman (1991) has failed empirically. In this paper, we develop a model of the exchange rate with heterogeneous agents in a free floating and a target zone regime. We show that this simple model mimics the empirical puzzles of exchange rates: excessive volatility, fat...

Although the ERM II rules allow the Danish krone to fluctuate against the euro within an official target zone of 4.5%, most of the time the exchange rate has remained in a narrow range around its unconditional mean. Estimating a Smooth Transition Autoregression Target Zone (STARTZ) model...

The coordination channel has been proposed as a means by which foreign exchange market intervention may be effective, in addition to the traditional portfolio balance and signaling channels. If strong and persistent misalignments of the exchange rate are caused by non-fundamental influences,...

In this paper we provide evidence for Evans and Lyons' (2005b) model of an information aggregation process in FX markets using a German bank's end-user order flow from 2002 to 2003. Though customer order flow is unambiguously the vehicle incorporating non-public information into exchange rates...