Explanations of Exchange Rate Volatility and Other Empirical Regularities in Some Popular Models of the Foreign Exchange Market

Flood, Robert P.

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Explanations of Exchange Rate Volatility and Other Empirical Regularities in Some Popular Models of the Foreign Exchange Market

NBER Working Paper No. w0625

48 Pages Posted: 23 Apr 2004 Last revised: 18 Sep 2022

See all articles by Robert P. Flood

Robert P. Flood

International Monetary Fund (IMF) - Research Department; CENTRUM Business School; National Bureau of Economic Research (NBER)

Date Written: February 1981

Abstract

The present paper is intended to accomplish two tasks. First, models predicting overshooting and magnification, respectively, will be checked for their consistency with two key empirical regularities: A. The observed pattern of price level vs. exchange-rate volatility. B. The observed pattern of spot exchange-rate vs. forward exchange-rate volatility. Second, a widely neglected reason for exchange-rate volatility, activist monetary policy, will be studied.

Suggested Citation: Suggested Citation

Flood, Robert P., Explanations of Exchange Rate Volatility and Other Empirical Regularities in Some Popular Models of the Foreign Exchange Market (February 1981). NBER Working Paper No. w0625, Available at SSRN: https://ssrn.com/abstract=275381