Heterogeneity of Agents and Exchange Rate Dynamics: Evidence from the EMS
Publication year
2006Publisher
Nijmegen : Economie
Series
Working paper
Number of pages
41 p.
Publication type
External research report

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Organization
Internationale economie
Financiële economie en ondernemingsfinanciering
Subject
Working paper; Nijmegen Centre for EconomicsAbstract
We develop and estimate a dynamic heterogeneous agent model for the EMS period. Our empirical
results suggest that the existence of heterogeneous interacting agents is indeed a possible explanation for the dynamics of exchange rates during the EMS; we find strong evidence in favor of our model using in- and out-of-sample tests. Moreover, we show that the heterogeneous agent model outperforms the random walk in out-of-sample forecasting in all country/period combinations. Finally, we study the dynamic limit properties of the estimated non-linear system.
This item appears in the following Collection(s)
- Academic publications [227881]
- Electronic publications [107344]
- Nijmegen School of Management [17887]
- Open Access publications [76465]
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