A database of individual forecasters' exchange rate predictions is analyzed. We demonstrate that only a small minority can be classed as rational, that most forecasts are inferior to easily available alternatives, and that relatively good performance in one period is not a reliable indicator of relatively good performance in subsequent periods. JEL Classification Number: F31

We study the properties of foreign exchange risk premia that can explain the forward bias puzzle – the tendency of high-interest rate currencies to appreciate rather than depreciate. These risk premia arise endogenously from the no-arbitrage condition we impose on the relation between the term structure of interest rates and exchange rates, and they compensate for both currency risk and interes...

the paper examines for the first time the foreign exchange intervention policy in foreign exchange market of iran. and in this framework, the study designs and simulates the foreign exchange intervention model in iran. in the first section, the paper shows that the injection of oil revenues directly to economy and also the absence of potent structure of output are inclusively caused the central...

 The foreign exchange market (FX market) accounts for 40% of the total volume of the world’s e-commerce by its own. Based on statistics, sometimes up to 90 per cent of the traders lose their total capital in this market just within six months to one year and leave this market. The probability of loss in the FX market can be estimated by probability theory. The present paper intends to demonst...

The paper analyzes the interactions between the precision of information, trade and welfare within a decision framework of an exporting firm. Information in a financial market is described in terms of a publicly observable signal. With higher transparency, the signal conveys more precise information about the random foreign exchange rate. More precise information about exchange rate changes has...

This paper studies the survival of fixed exchange rate regimes. The probability of an exit from a fixed exchange rate regime depends on the time spent within this regime. In such a context durations models are appropriate, in particular because of the possible non-monotonic pattern of duration dependence. Non-parametric estimates show that the pattern of duration dependence exhibits non-monoton...

The purpose of this paper is to investigate the role of exchange rate uncertainty in determining foreign direct R&D investment into the UK. We estimate an econometric model of FDI in R&D, using a panel of manufacturing industries. Our results suggest that an increase in the volatility of the euro-dollar exchange rate tends to relocate R&D investment from the Euro Area into the UK. A rise in the...

This paper analyzes the effects of pegged and floating exchange rates using a two-country dynamic general equilibrium model that is calibrated to the US and a European aggregate. The model assumes shocks to money, productivity and the interest rate parity condition. It captures the fact that the sharp increase in nominal exchange rate volatility after the end of the Bretton Woods (BW) system wa...

To simultaneously account for the properties of interest-rate term structure and foreign exchange rates within one arbitrage-free framework, we propose a class of multicurrency quadratic models (MCQM) with an (m+ n) factor structure in the pricing kernel of each economy. The m factors model the term structure of interest rates. The n factors capture the portion of the exchange rate movement tha...

A new presentation of the specific factors model shows how labor fares under international trade by considering how the price elasticity of the nominal wage rate responds to the terms of trade as well as factor endowments. Gains to labor are decomposed into measurable terms of trade effects and production bias effects. If trade is caused by differences in technology, trade can harm the interest...