This paper examines the empirical relation between nominal exchange rates and macroeconomic fundamentals for five major OECD countries between 1974 and 1987. Five theoretical models of exchange rate determination are considered. Potential non-linearities are examined using a variety of...

Intraday interest rates are zero. Consequently, a foreign exchange dealer can short a vulnerable currency in the morning, close this position in the afternoon, and never face an interest cost. This tactic might seem especially attractive in times of fixed-rate crisis, since it suggests an...