Heterogeneous expectations and tests of efficiency in the yen/dollar forward exchange rate market

Article Abstract:

The efficiency of the forward yen/dollar exchange rate market is examined using micro survey data. The data are utilized to determine potential profits of individual forecasters based on a natural trading mechanism. It is shown that the survey data can be employed to obtain positive profits, although they are not the best tool for predicting future spot rates with respect to typical mean square forecast error criteria. The positive profits generated by the survey data are small and significantly variable in nature.

Foreign Exchange Dealers, Commodity Contracts Dealing, Econometrics & Model Building, Econometrics, Industrial efficiency, Economic efficiency, Dollar (United States), Rational expectations (Economics), Business models, Yen (Japan), Foreign exchange market

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Target zones and forward rates in a model with repeated realignments

Article Abstract:

Ananalysis of target zones and forward rates is presented. The analysis focuses on model of both variables with repeated alignments. Spot and forward exchange rates are then examined for possible band realignments. Forward market data areused to evaluate the credibility of the French/German target zone for the European Monetary System. It is shown that parameter estimates simulate prevailing conditions of the French Franc/Deutsch Mark exchange rate in the 1980s.

Research, European Monetary System

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Expectations, the Exchange Rate, and the Current Account

Article Abstract:

The relationship of the current account and exchange rate is examined. Consideration is given to uncertainty of future real income government spending and monetary policy. No unique relationship is established. The model developed is suggested for use in international finance.

Economics

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