Robustness and exchange rate volatility

• 成果类型: Article
• 署名作者: Djeutem, Edouard; Kasa, Kenneth
• 署名单位: Simon Fraser University
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2013.05.003
• 发表日期: 2013
• 页码: 27-39
• 关键词: volatility; Robustness; Exchange rates

摘要

This paper studies exchange rate volatility within the context of the monetary model of exchange rates. We assume that agents regard this model as merely a benchmark, or reference model, and attempt to construct forecasts that are robust to model misspecification. We show that revisions of robust forecasts are more volatile than revisions of nonrobust forecasts, and that empirically plausible concerns for model misspecification can explain observed exchange rate volatility. We also briefly discuss the implications of robust forecasts for a number of other exchange rate puzzles. (C) 2013 Elsevier B.V. All rights reserved.