This paper takes another look at the portfolio theory of exchange rate behavior, using a survey-based definition of the risk premium and measuring the portfolio variable by the net stock of foreign assets. The model relates the risk premium to net foreign assets, together with related equations...

In the early 1970s, the portfolio theory of exchange rates with rational expectations was introduced to explain the behavior of floating exchange rates. While attractive in principle, the approach failed along with other theories to provide empirically convincing results. Over the years, the...

Using a simple model of transactions costs in the interbank foreign exchange market and a model of vehicle currency use, the interaction between transactions costs and vehicle currency use is explored. The impact of volume on bid-ask spreads is estimated from cross-section time series data on...

Korea faces a number of unique problems that affect its exchange rate policy. Among these are its asymmetric competitive position vis-...-vis Japan, which is both its major supplier of machine tools and a leading competitor in third markets; the current policy of financial liberalization that...