Learning about Fundamentals: The Widening of the French ERM Bands in 1993,

OnderzoeksoutputAcademicpeer review

Samenvatting

Learning about Fundamentals: The Widening of the French ERM Bands in 1993. — The authors incorporate a Bayesian learning model into a fairly general model of exchange rate determination in discrete time. The model is applied to the period following the widening of the French-German ERM bands in August 1993, in which a systematic underprediction of the franc can be observed until February 1994. A (substantial) part of these forecast errors can be mimicked by a Bayesian learning process. Simulations with our model show that, after the widening of the bands, agents, contrary to their initial expectations, gradually learned that the true process driving monetary conditions in France had not changed notably.
Originele taal-2English
Pagina's (van-tot)25-42
Aantal pagina's17
TijdschriftWeltwirtschaftliches Archiv=Review of world economics
Volume134
Nummer van het tijdschrift1
StatusPublished - mrt-1998

Citeer dit