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Technical trading and the volatility of exchange rates

Title data

Bauer, Christian ; Herz, Bernhard:
Technical trading and the volatility of exchange rates.
In: Quantitative Finance. Vol. 4 (2004) Issue 4 . - pp. 399-415.
ISSN 1469-7696
DOI: https://doi.org/10.1080/14697680400008650

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Abstract in another language

The microeconomic structure of foreign exchange markets can cause excessive volatility in flexible exchange rate regimes. The market entry of chartists changes the composition of the foreign exchange market and leads to excessive volatility. Our chartist model predicts a continuum of equilibria and a U-shaped relation between exchange rate volatility and the measured trend, which is supported by the empirical evidence. The data show a positive nonlinear relation between trend and volatility as predicted by the model. In such a situation monetary policy may be able to smooth the exchange rate without changing macroeconomic fundamentals.

Further data

Item Type: Article in a journal
Refereed: Yes
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I > Chair Economics I - Univ.-Prof. Dr. Bernhard Herz
Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 13 Apr 2015 08:49
Last Modified: 11 May 2015 05:53
URI: https://eref.uni-bayreuth.de/id/eprint/10161