Exchange rate puzzles : a review of the recent theoretical and empirical developments
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Date
Authors
Mokoena, Thabo Mishack
Journal Title
Journal ISSN
Volume Title
Publisher
University of Pretoria, Department of Economics
Abstract
This paper presents a comprehensive literature review of the theoretical and empirical
developments that have taken place over the last two decades in an attempt to address the
exchange rate puzzles. Specifically, we discuss non-linear and Bayesian econometric techniques,
Dynamic General Equilibrium models, and the Market Microstructure approach that has been
designed to address three exchange rate puzzles, namely, the Purchasing Power Parity (PPP)
puzzle, the exchange rate disconnect puzzle and the exchange rate determination puzzle. We
conclude that the exchange rate puzzles are likely to be less puzzling, if researchers decide to
move to non-linear econometric frameworks and microfounded general equilibrium models.
Description
Keywords
Dynamic general equilibrium models, Exchange rate puzzles, Non-linear and Bayesian econometric models
Sustainable Development Goals
Citation
Mokoena, T, Gupta, R & Van Eyden, R 2008, 'Exchange rate puzzles: a review of the recent theoretical and empirical developments', University of Pretoria, Department of Economics, Working paper series, no. 2008-27. [http://web.up.ac.za/default.asp?ipkCategoryID=736&sub=1&parentid=677&subid=729&ipklookid=3]