Monetary policy and inferential expectations of exchange rates
We present a macroeconomic market experiment to isolate the impact of monetary shocks on the exchange rate, as an alternative to SVAR identification. In a non-stochastic treatment, covered interest rate parity holds and predicted exchange rates are tracked well. In a stochastic treatment, we model expectations using a Neyman-Pearson hypothesis test (inferential expectations) and find evidence of belief conservatism and uncovered interest rate parity failure. The market environment magnifies...[Show more]
|Collections||ANU Research Publications|
|Source:||Journal of International Financial Markets, Institutions and Money|
|01_Menzies_Monetary_policy_and_2012.pdf||1.93 MB||Adobe PDF||Request a copy|
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