The paper presents new empirical results that elucidate the dynamics of the foreign exchange market. The first half of the paper is an updated study of the exchange rate expectations held by market participants, as reflected in responses to surveys, and contains the following conclusions. First,...

The careening path of the dollar in recent years has shattered more than historical records and the financial health of some speculators. It has also helped to shatter faith in economists' models of the determination of exchange rates.We have understood for some time that under conditions of...

The overshooting theory of exchange rates seems ideally designed to explain some important aspects of the movement of the dollar in recent years. Over the period 1981-84, for example, when real interest rates in the United States rose above those of its trading partners (presumably due to shifts...