Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212033 
Authors: 
Year of Publication: 
2006
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 8/2006
Publisher: 
Bank of Finland, Helsinki
Abstract: 
Since the magnitude of exchange rate overshooting may not be the same for different exchange rates of a currency, a monetary expansion or contraction in, for example, the EMU, will affect the exchange rate between the U.S. dollar and the yen, even though there are no changes in monetary fundamentals in the U.S. or Japan. This fact is demonstrated in a sticky-price monetary model due originally to Dornbusch (1976) that is enlarged with currency traders that use Chartism in the form of moving averages.It is also demonstrated that purchasing power parity (PPP) does not necessarily hold in long-run equilibrium.These results are interesting since, according to the empirical literature, there are often large movements in nominal exchange rates that are apparently unexplained by macroeconomic fundamentals, and there is also a weak support for PPP.
Subjects: 
Chartism
foreign exchange
macroeconomic fundamentals
moving averages
overshooting and PPP
JEL: 
F31
F41
Persistent Identifier of the first edition: 
ISBN: 
952-462-274-2
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.