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| Author: | Moosa, I. A. |
| Title: | A Test of the News Model of Exchange Rates |
| Journal: | Weltwirtschaftliches Archiv
2002 : VOL. 138:4, p. 694-710 |
| Index terms: | NEWS REPORTING MODEL TESTING EXCHANGE RATES EFFECTIVENESS |
| Language: | eng |
| Abstract: | An important consequence of the monetary view of exchange rate determination is that the foreign exchange market must be efficient. A market is said to be efficient if current market prices reflect all available information, so that the excess returns of any speculative investment are uncorrelated with any form of costless information available at the time an investor's decision is made. The exchange rate reflects expectations concerning the future course of events. The objective of this paper is to measure the contribution of news to fluctuations in six exchange rates over a period extending back to 1975. The analysis also involves testing the unbiased efficiency hypothesis and hence the ability of the forward rate to predict the spot rate. The starting point is an evaluation o the existing empirical evidence on the news model. |
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