Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/22971
Authors: 
Pope, Robin
Selten, Reinhard
Kaiser, Johannes
von Hagen, Jürgen
Year of Publication: 
2006
Series/Report no.: 
Bonn econ discussion papers 2006,27
Abstract: 
Variance of exchange rates around predictions can be from 1) undiscovered fundamentals, 2) efficient markets, 3) destabilising speculation, or 4) regime and personality differences in the heuristics used in the stage of evaluating alternatives. Field and experimental evidence identifies 4) as the underlying cause. Variance effects prior to the resolution of risk damage macroeconomic management but are excluded by expected utility theory wherein utilities attach only to the segment of the outcome flow after risk is passed. To include the evaluation stage and such damage from variance, the authorities can use models within SKAT, the Stages of Knowledge Ahead Theory.
Subjects: 
exchange rate regime
exchange rate unpredictability
experiment
SKAT the Stages of Knowledge Ahead Theory
variance
outlier analysis
JEL: 
F31
F33
D81
D80
Document Type: 
Working Paper

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