The Economics of Foreign Exchange: A Practical Market Approach
A pioneering exploration of the relevance of economic theory to the practical realities of the foreign exchange market, this volume presents a well-reasoned, comprehensive examination of the degree to which economic theories and forecasts are helpful in predicting exchange rates. Douch, an economist who has worked closely with the foreign exchange market, argues that theoretical economic models have exhibited some serious inadequacies in forecasting the future. In an attempt to determine the real predictive value of economic theory in this context, Douch examines each of the different economic approaches in-depth and then analyzes the actual workings of the foreign exchange market from the perspective of the market participants. Particular emphasis is placed upon the reasons for the observed failure of economic theory to reliably predict exchange rate movements over time.
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The balance of payments approach
The asset market approach to exchange rates
The monetary approach
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asset market approach average balance of payments capital account capital flows cent central bank Chapter companies countries currency dealers determined Deutschmark discount dollar economic forecasting economic fundamentals economic theories effect equilibrium euro-currency example exchange controls exchange rate changes exchange rate movements exchange rate system exports exposure fact factors figures fixed exchange rate floating exchange rates foreign exchange market forward exchange rate forward margin forward rate future exchange rate game theory growth hedging high interest rates important increased interest differentials interest rate differentials intervention investment decisions investment flows investors long-term longer-term look major money supply monthly move movements in exchange option overseas particular period players position predict problem profit purchasing power parity rational expectations reduce relative interest rates relative price rise risk seen sell seller speculators spot rate statistics sterling supply and demand surplus term trade flows trend underlying volatility