Expectations, disagreement and exchange rate pressure
2022
Beckmann, Joscha | Boonman, Tjeerd M.
This paper provides a novel look on the relationship between survey-based exchange rate expectations and exchange market pressure. Using monthly data for twelve emerging countries from 2003 until 2020, we show that exchange market pressure often increases disagreement among exchange rate forecasters, especially for currencies with high trading volume. This offers an explanation for increasing volatility in the spot rate through expectations after a surge in exchange market pressure. We also find that forecasters take exchange rate overshooting patterns into account. Periods of exchange rate pressure are succeeded by the belief that the domestic currency appreciates against the US dollar.
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