Exchange Rate in a Behavioral Finance Framework by Paul de Grauwe
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Exchange Rate in a Behavioral Finance Framework
By Paul de Grauwe

The Exchange Rate in a Behavioral Finance Framework

By (author) See other recent books by Paul de Grauwe See other recent books by Marianna Grimaldi
Format: Hardback

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Exchange Rate in a Behavioral Finance Framework by Paul de Grauwe

Book Description

This book provides an alternative view of the workings of foreign exchange markets. The authors' modeling approach is based on the idea that agents use simple forecasting rules and switch to those rules that have been shown to be the most profitable in the past. This selection mechanism is based on trial and error and is probably the best possible strategy in an uncertain world, the authors contend. It creates a rich dynamic in the foreign exchange markets and can generate bubbles and crashes. Sensitivity to initial conditions is a pervasive force in De Grauwe and Grimaldi's model. It explains why large exchange-rate changes and volatility clustering occur. It also has important implications for understanding how the news affects the exchange rate. De Grauwe and Grimaldi conclude that news in fundamentals has an unpredictable effect on the exchange rate. Sometimes, they maintain, it alters the exchange rate considerably; at other times it has no effectwhatsoever. The authors also use their model to analyze the effects of official interventions in the foreign exchange market. They show that simple intervention rules of the "leaning-against-the-wind" variety can be effective in eliminating bubbles and crashes in the exchange rate. They further demonstrate how, quite paradoxically, by intervening in the foreign exchange market the central bank makes the market look more efficient. Clear and comprehensive, The Exchange Rate in a Behavioral Finance Framework is a must-have for analysts in foreign exchange markets as well as students of international finance and economics.

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Book Details

ISBN: 9780691121635
ISBN-10: 069112163X
Format: Hardback
(229mm x 152mm x 15mm)
Pages: 224
Imprint: Princeton University Press
Publisher: Princeton University Press
Publish Date: 13-Mar-2006
Country of Publication: United States

Books By Author Paul de Grauwe

Limits of the Market by Paul de Grauwe Limits of the Market, Hardback (February 2017)

Paul De Grauwe examines why a healthy mix of market and state seems so difficult and analyses the internal and external limits of the market and the government, and the swing between these two points.

Economics of Monetary Union by Paul de Grauwe Economics of Monetary Union, Paperback (February 2016)

Economics of Monetary Union provides concise analysis of theories and policies relating to monetary union. It addresses current issues surrounding the Eurozone, including; costs and benefits of possible exits by member countries, an analysis of the role of the ECB as new single supervisor and detail on the sovereign debt crisis.

Lectures on Behavioral Macroeconomics by Paul de Grauwe Lectures on Behavioral Macroeconomics, Hardback (October 2012)

Explains the fluctuations of economic activity that are an endemic feature of market economies. This title argues for a different macroeconomics model - one that works with an internal explanation of the business cycle and factors in agents limited cognitive abilities.

» View all books by Paul de Grauwe

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Author Biography - Paul de Grauwe

Paul De Grauwe is Professor of International Economics at the University of Leuven, Belgium. His books include The Economics of Monetary Union and Exchange Rate Theories: Chaotic Models of the Foreign Exchange Markets. Marianna Grimaldi is an economist in the research department of the Sveriges Riksbank, Stockholm. Her research interests are international monetary relations and exchange rate economics.

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Recent books by Paul de Grauwe close
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Exchange Rate in a Behavioral Finance Framework by Marianna Grimaldi
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