THE EXCHANGE RATE IN A BEHAVIORAL FINANCE FRAMEWORK by Paul de Grauwe, Marianna Grimaldi ( 9780691121635 )

Item Details

Title:

THE EXCHANGE RATE IN A BEHAVIORAL FINANCE FRAMEWORK

By:

Paul de Grauwe, Marianna Grimaldi

Format:

Hardback

List price:

£100.00

Our price:

£80.00

Discount:

20% off

You save:

£20.00

ISBN 10:

069112163X

ISBN 13:

9780691121635

Availability:

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Stock:

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Publisher:

PRINCETON UNIVERSITY PRESS

Pub. date:

13 March, 2006

Pages:

224

Description:

Offers an alternative view of the workings of foreign exchange markets. This title explains why large exchange-rate changes and volatility clustering occur. It analyzes the effects of official interventions in the foreign exchange market. It is suitable for analysts in foreign exchange markets and students of international finance and economics.

Synopsis:

This book provides an alternative view of the workings of foreign exchange markets. The authors' modeling approach is based on the idea that agents use simple forecasting rules and switch to those rules that have been shown to be the most profitable in the past. This selection mechanism is based on trial and error and is probably the best possible strategy in an uncertain world, the authors contend. It creates a rich dynamic in the foreign exchange markets and can generate bubbles and crashes. Sensitivity to initial conditions is a pervasive force in De Grauwe and Grimaldi's model. It explains why large exchange-rate changes and volatility clustering occur. It also has important implications for understanding how the news affects the exchange rate. De Grauwe and Grimaldi conclude that news in fundamentals has an unpredictable effect on the exchange rate. Sometimes, they maintain, it alters the exchange rate considerably; at other times it has no effectwhatsoever. The authors also use their model to analyze the effects of official interventions in the foreign exchange market. They show that simple intervention rules of the "leaning-against-the-wind" variety can be effective in eliminating bubbles and crashes in the exchange rate. They further demonstrate how, quite paradoxically, by intervening in the foreign exchange market the central bank makes the market look more efficient. Clear and comprehensive, The Exchange Rate in a Behavioral Finance Framework is a must-have for analysts in foreign exchange markets as well as students of international finance and economics.

Illustrations:

120 line illus. 21 tables.

Publication:

Imprint:

Princeton University Press

Returns:

Returnable

Some other items by this author:

DIMENSIONS OF COMPETITIVENESS (HB)

ECONOMICS OF MONETARY UNION (PB)