Abstract

  
 

References (120)



 
 

Citations (42)



 


 



Viewpoint: Towards a Solution to the Puzzles in Exchange Rate Economics: Where Do We Stand?


Lucio Sarno


City University London - Sir John Cass Business School; Centre for Economic Policy Research (CEPR)

Canadian Journal of Economics, Vol. 38, No. 3, pp. 673-708, August 2005

Abstract:     
This paper provides a selective overview of puzzles in exchange rate economics. We begin with the forward bias puzzle: high interest rate currencies appreciate when one might guess that investors would demand higher interest rates on currencies expected to fall in value. We then analyse the purchasing power parity puzzle: the real exchange rate displays no (strong) reversion to a stable long-run equilibrium level. Finally, we cover the exchange rate disconnect puzzle: the lack of a link between the nominal exchange rate and economic fundamentals. For each puzzle, we critically review the literature and speculate on potential solutions.

Number of Pages in PDF File: 36

JEL Classification: F31

Accepted Paper Series


Date posted: August 7, 2005  

Suggested Citation

Sarno, Lucio, Viewpoint: Towards a Solution to the Puzzles in Exchange Rate Economics: Where Do We Stand?. Canadian Journal of Economics, Vol. 38, No. 3, pp. 673-708, August 2005. Available at SSRN: http://ssrn.com/abstract=772984

Contact Information

Lucio Sarno (Contact Author)
City University London - Sir John Cass Business School ( email )
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Feedback to SSRN (Beta)


Paper statistics
Abstract Views: 836
Downloads: 25
References:  120
Citations:  42

© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright
This page was processed by apollo2 in 0.453 seconds