MODEL UNCERTAINTY AND EXCHANGE RATE VOLATILITY

• 成果类型: Article
• 署名作者: Markiewicz, Agnieszka
• 署名单位: Erasmus University Rotterdam; Erasmus University Rotterdam - Excl Erasmus MC
• 刊物名称: INTERNATIONAL ECONOMIC REVIEW
• ISSN/ISSBN: 0020-6598
• DOI: 10.1111/j.1468-2354.2012.00702.x
• 发表日期: 2012
• 页码: 815-843
• 关键词: business cycles; monetary approach; expectations; BEHAVIOR; dollar; fundamentals; POLICY; rules

摘要

This article proposes an explanation for shifts in the volatility of exchange-rate returns. Agents are uncertain about the true data generating model and deal with this uncertainty by making inference on the models and their parameters' approach, I call model learning. Model learning may lead agents to focus excessively on a subset of fundamental variables. Consequently, exchange-rate volatility is determined by the dynamics of these fundamentals and changes as agents alter models. I investigate the empirical relevance of model learning and find that the change in volatility of GBP/USD in 1993 was triggered by a shift between models.