Title:

Are Exchange Rates Excessively Volatile? And What Does "Excessively Volatile" Mean Anyway?, Research Paper 9601

PREVIOUS | NEXT

Are Exchange Rates Excessively Volatile? And What Does "Excessively Volatile" Mean Anyway?, Research Paper 9601

DATE: January 1996

PART OF: AUTHORS:

ABSTRACT: Using data for the major currencies from 1973 to 1994, we apply recent tests of asset price volatility to reexamine whether exchange rates have been "excessively" volatile with respect to the predictions of the monetary model of the exchange rate and of standard extensions that allow for sticky prices, sluggish money adjustment, and time-varying risk premia. Consistent with previous evidence from regression-based tests, most of the models that we examine are rejected by our volatility-based tests. In general, however, we find that exchange rates have not been excessively volatile relative to movements of their determinants, with respect to the predictions of even the most restrictive version of the monetary model. Alternative measures of volatility, however, may disguise the cause of rejection as excessive exchange rate volatility.

Download (pdf) View Full Text

Share this page:


Diversity is critical to the Federal Reserve, and we are firmly committed to fostering a diverse and inclusive culture throughout the Federal Reserve System. Collections within FRASER contain historical language, content, and descriptions that reflect the time period within which they were created and the views of their creators. Certain collections contain objectionable content—for example, discriminatory or biased language used to refer to racial, ethnic, and cultural groups. These viewpoints and attitudes are inconsistent with our values, but the original descriptions are retained to ensure that they are not erased from the historical record.
Save & Share
less

Bartolini, Leonardo and Bodnar, Gordon M. "Are Exchange Rates Excessively Volatile? And What Does "Excessively Volatile" Mean Anyway?, Research Paper 9601," Research Papers (Federal Reserve Bank of New York) (January 1996). https://fraser.stlouisfed.org/title/6570/item/615516, accessed on March 26, 2023.

More Information
less

SUBJECTS:

THEMES: CLASSIFICATION:
  • jel: F31
  • jel: E44
  • lcc: HG136 .R45 no.9601
IDENTIFIERS:
  • oclc: 34683795
  • fip:fednrp:9601:
Metadata (XML)
Metadata (JSON)