http://repub.eur.nl/res/aut/14705/ List of Publications en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/38142/ 2012-05-21T00:00:00Z This paper compares two competing approaches to model foreign exchange market participants' behavior: statistical learning and fitness learning. These learning mechanisms are applied to a set of predictors: chartist and fundamentalist rules. We examine which of the learning approaches is best in terms of replicating the exchange rate dynamics within the framework of a standard asset pricing model. We find that both learning methods reveal the fundamental value of the exchange rate in the equilibrium but only fitness learning creates the disconnection phenomenon and only statistical learning replicates volatility clustering. None of the mechanisms is able to produce a unit root process but both of them generate non-normally distributed returns. http://repub.eur.nl/res/pub/12418/ 1993-12-01T00:00:00Z The paper demonstrates that in an environment of free banking where some agents have imperfect information regarding the circulation and debasement rates of alternative money suppliers, the equilibrium supply of money involves mixed strategies. It follows that the circulation and debasement rates are intrinsically stochastic, but that their averages are below the rates set by a monopoly bank. Empirical tests reveal that these predictions are consistent with the free banking era of the United States. The paper is also relevant for the discussion about the future monetary union in the EC.