Expectations, stability, and exchange rate dynamics under the Post Keynesian hypothesis

Hiroya Akiba

    Research output: Contribution to journalArticle

    4 Citations (Scopus)

    Abstract

    This paper considers the recent empirical support for the Post Keynesian hypothesis on the role of expectations in the foreign exchange market. Our specific interests are whether the model exhibits stability, and whether an overshooting phenomenon is observed. The model is likely to be stable for plausible parameter values, contrary to the conclusion of saddle-point instability in the "sticky price monetary model." Overshooting is possible for expectations for the medium-term horizon, but undershooting is also possible for the short-term horizon. Because the extrapolative expectations are stronger than the regressive expectations, undershooting is likely for the actual exchange rate in the short run.

    Original languageEnglish
    Pages (from-to)125-139
    Number of pages15
    JournalJournal of Post Keynesian Economics
    Volume27
    Issue number1
    Publication statusPublished - 2004 Sep

    Fingerprint

    Post Keynesian
    Exchange rate dynamics
    Overshooting
    Sticky prices
    Exchange rates
    Foreign exchange market
    Short-run
    Saddlepoint

    Keywords

    • Exchange rate expectations
    • Stability

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Expectations, stability, and exchange rate dynamics under the Post Keynesian hypothesis. / Akiba, Hiroya.

    In: Journal of Post Keynesian Economics, Vol. 27, No. 1, 09.2004, p. 125-139.

    Research output: Contribution to journalArticle

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