Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/68121
Authors: 
Ferreira, José Eduardo de A.
Year of Publication: 
2006
Series/Report no.: 
Department of Economics Discussion Paper, University of Kent 06,04
Abstract: 
This paper investigates the presence of periodically collapsing rational bubbles in exchange rates for a sample of industrialised countries. A periodically collapsing rational bubble is defined as an explosive deviation from economic fundamentals with distinct expansion and contraction phases in finite time. By using Markov-switching regime models we were not able to find robust evidence of a bubble driving the exchange rate away from fundamentals. Moreover, the results also revealed significant non-linearities and different regimes. The importance of these findings suggests that linear monetary models may not be appropriate to examine exchange rate movements.
Subjects: 
Foreign Exchange
Bubbles
Fundamentals
Markov-Switching
Assets
JEL: 
F31
F37
F41
Document Type: 
Working Paper

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