Foreign Exchange Rate Expectations: Micro Survey Data / Takatoshi Ito.

By:

Ito, Takatoshi

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w2679.Publication details: Cambridge, Mass. National Bureau of Economic Research 1988.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: This paper analyzes the panel data of bi-weekly surveys, conducted by the Japan Center for International Finance, on the yen/dollar exchange rate expectations of forty-four institutions for two years. There are three major findings in this paper. First, market participants are found to be heterogeneous. There are significant "individual effects" in their expectation formation. Second, many institutions are found to violate the rational expectation hypothesis. Third, forecasts with long horizons showed less yen appreciation than those with short horizons. Cross-equation constraints implied by the consistencyof the forecast term structure are strongly rejected in the data.

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August 1988.

This paper analyzes the panel data of bi-weekly surveys, conducted by the Japan Center for International Finance, on the yen/dollar exchange rate expectations of forty-four institutions for two years. There are three major findings in this paper. First, market participants are found to be heterogeneous. There are significant "individual effects" in their expectation formation. Second, many institutions are found to violate the rational expectation hypothesis. Third, forecasts with long horizons showed less yen appreciation than those with short horizons. Cross-equation constraints implied by the consistencyof the forecast term structure are strongly rejected in the data.