tailieunhanh - Foreign exchange rate expectations: Micro survey data

this paper analyzes the panel data of bi-weekly surveys, conducted by the japan center for international finance, on the yen dollar exchange rate expectations of forty—four institutions for two years. there are three major findings in this paper. first, market participants are found to be heterogeneous. there are significant "individual effects" in their expectation institutions are found to violate the formation. | NBER WORKING PAPER SERIES FOREIGN EXCHANGE RATE EXPECTATIONS MICRO SURVEY DATA Takatoshi Ito Working Paper No. 2679 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge MA 02138 August 1988 Discussions with Jeffrey A. Frankel Kenneth A. Froot Hidehiko Ichimura Maurice Obstfeld and Christoper Sims were very useful. I have benefitted from comments received form participants of seminars at Harvard University University of Minnesota University of California at San Diego and National Bureau of Economic Research. I thank the Japan Center for International Finance especially President Tomomitsu Oba and Vice President Shoji Ochi for having made the survey data in the Tokyo market available. Financial support from National Science Foundation grant number SES-8808828 and from Japan Economic Research Foundation Nihon Keizai Kenkyu Shore Zaidan is gratefully acknowledged. This research is part of NBER s research program in International Studies. Any opinions expressed are those of the author not those of the National Bureau of Economic Research. NBER Working Paper 2679 August 11988 FOREIGN EXCHANGE RATE EXPECTATIONS MICRO SURVEY DATA ABSTRACT This paper analyzes the panel data of bi-weekly surveys conducted by the Japan Center for International Finance on the yen dollar exchange rate expectations of forty-four institutions for two years. There are three major findings in this paper. First market participants are found to be heterogeneous. There .are significant individual effects in their expectation formation. Second many institutions are found to violate the rational expectation hypothesis. Third forecasts with long horizons showed less yen appreciation than those with short horizons. Cross-equation constraints implied by the consistency of the forecast term structure are strongly rejected in the data. Takatoshi Ito Institute of Economic Research Hitotsubashi University Kunitachi Tokyo 186 Japan 1. Introduction As rational expectations have become a .