Large Swings in Currencies driven by Fundamentals
October 2006
Research Paper
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Exchange rate returns are fat-tailed distributed. We provide evidence that the apparent non-normality derives from the behavior of macroeconomic fundamentals. Economic and probabilistic arguments are offered for such a relationship. Empirical support is given by testing against normality and through investigating the tail shapes of the fundamentals' distributions. The currently available data sets on floating exchange rates permit a clearer picture than the relatively short spans with macroeconomic data available previously.
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- 2 2
- 6 9
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- institute
- tinbergen institute
- tinbergen
- universiteit
- rotterdam
- amsterdam
- universiteit van amsterdam
- ti discussion papers
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- universiteit rotterdam
