A Model of Stochastic Process Switching / Robert P. Flood, Peter M. Garber.

Format:

Book

Author/Creator:

Flood, Robert P.

Contributor:

Garber, Peter M.

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0626.

NBER working paper series no. w0626

Language:

English

Subjects (All):

Foreign exchange--Mathematical models.

Foreign exchange.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1981.

[Washington, D.C.] : [Board of Governors of the Federal Reserve System], [1982]

Summary:

In this paper we develop a rational expectations exchange rate model which is capable of confronting explicitly agents' beliefs about a future switch in exogenous driving processes. In our set-up the agents know with certainty both the initial exogenous process and the new process to be adopted when the switch occurs. However, they do not know with certainty the timing of future switch as it depends on the path followed by the (stochastic) exchange rate. The model is discussed in terms of the British return to pre-war parity, in 1925. However, our results are applicable to a variety of situations where process switching depends on the motion of a key endogenous variable.

Notes:

February 1981.

Includes bibliographical references (page 15).

Print version record

OCLC:

696337517