Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67766
Authors: 
Smith, Gregor W.
Year of Publication: 
1995
Series/Report no.: 
Queen's Economics Department Working Paper 1248
Abstract: 
Economists often describe nominal exchange rates as forward-looking, so that they reflect discounted, expected, future fundamentals. This study applies a method for identifying the discount rate involved, without knowing or measuring fundamentals. Identification arises from assumptions on the stochastic process followed by fundamentals, combined with nonlinearity arising from expected future regime changes. Two applications yield evidence against the present-value model in the form of discount rates which are negative and statistically significant.
Subjects: 
floating exchange rates
regime switching
JEL: 
F32
G12
Document Type: 
Working Paper

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