Imperfect knowledge and behaviour in the foreign exchange market

Michael D. Goldberg, Roman Frydman

    Research output: Contribution to journalArticle

    Abstract

    This paper explores the consequences of imperfect knowledge for exchange rate dynamics within the monetary class of models. Our framework, which we call the theories consistent expectations (TCE) framework, provides a particular formalisation of a world in which agents use theories in order to look forward, but in which these theories provide only qualitative knowledge rather than quantitative knowledge about the economy. We find that as long as agents possess at least some degree of imperfect knowledge, the monetary models of the exchange rate generate dynamics consistent with the behaviour observed in the literature.

    Original languageEnglish (US)
    Pages (from-to)869-893
    Number of pages25
    JournalEconomic Journal
    Volume106
    Issue number437
    StatePublished - Jul 1996

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    Foreign exchange market
    Exchange rate dynamics
    Formalization

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Goldberg, M. D., & Frydman, R. (1996). Imperfect knowledge and behaviour in the foreign exchange market. Economic Journal, 106(437), 869-893.

    Imperfect knowledge and behaviour in the foreign exchange market. / Goldberg, Michael D.; Frydman, Roman.

    In: Economic Journal, Vol. 106, No. 437, 07.1996, p. 869-893.

    Research output: Contribution to journalArticle

    Goldberg, MD & Frydman, R 1996, 'Imperfect knowledge and behaviour in the foreign exchange market', Economic Journal, vol. 106, no. 437, pp. 869-893.
    Goldberg MD, Frydman R. Imperfect knowledge and behaviour in the foreign exchange market. Economic Journal. 1996 Jul;106(437):869-893.
    Goldberg, Michael D. ; Frydman, Roman. / Imperfect knowledge and behaviour in the foreign exchange market. In: Economic Journal. 1996 ; Vol. 106, No. 437. pp. 869-893.
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