publication . Report . Preprint . 1980

efficiency of foreign exchange markets and measures of turbulence

Jacob A. Frenkel; Michael L. Mussa;
Open Access
  • Published: 01 May 1980
  • Publisher: National Bureau of Economic Research
Abstract
Since the move to generalized floating in1973, exchange rates between major currencies have displayed large fluctuations. This turbulence of foreign exchange rates is an important concern of government policy and its explanation is a challenge for theories of foreign exchange market behavior. In Section I of this paper, we document the extent of turbulence in foreign exchange markets by examining (i) the magnitude of short-run variations in exchange rates relative to other measures of economic variability; (ii) the degree of divergence between actual and expected changes in exchange rates; and (iii) the extent to which exchange-rate movements have diverged from ...
Subjects
free text keywords: Turbulence, Financial economics, Sterilization (economics), Public policy, Foreign exchange swap, Microeconomics, Foreign exchange market, Interest rate parity, Economics, Price level, Foreign exchange risk
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