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- Title
THE ROLE OF SPECULATION IN THE FORWARD EXCHANGE MARKET: SOME CONSISTENT ESTIMATES ASSUMING RATIONAL EXPECTATIONS.
- Authors
Taylor, Mark P.
- Abstract
The article provides estimates of the rational expectations modem theory equilibrium condition for the floating exchange rates. It uses high-quality weekly data for the American dollar-French franc and American dollar-British sterling exchange rates. The article also utilizes a generalized method of moments estimator developed by Hansen (1982) to yield consistent and efficient estimates. For both dollar-sterling and dollar-franc, the estimated equation performed well by giving a good fit and satisfying the restrictions implied by the theory. The results suggested that the operations of commercial hedgers are relatively unimportant in determining the forward rate.
- Subjects
FOREIGN exchange rates; FOREIGN exchange; U.S. dollar; FRANC (French currency); POUND sterling; MONEY; MATHEMATICAL models of economics; MATHEMATICAL economics; MONETARY policy; NATIONAL currencies
- Publication
Oxford Bulletin of Economics & Statistics, 1987, Vol 49, Issue 3, p323
- ISSN
0305-9049
- Publication type
Article
- DOI
10.1111/j.1468-0084.1987.mp49003005.x