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Discussion Paper Details

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Title: Efficiency and Expectations Revisited: A Foreign Exchange Market with Bayesian Players

Author(s): Nikos Christodoulakis, Sarantis C Kalyvitis and Nick Karamouzis

Publication Date: September 1994

Keyword(s): Bayesian Learning, Devaluation, Efficiency, Expectations and Unbiasedness

Programme Area(s): International Macroeconomics

Abstract: The paper re-examines the efficiency hypothesis in the foreign exchange market. The traditional efficiency testing equations are reviewed and a model is developed that incorporates Bayesian revisions in the form of devaluation expectations. A number of propositions regarding the pattern of the coefficients in efficiency testing equations are established. The results are confirmed by the empirical estimation of the model for the Greek foreign exchange market.

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Bibliographic Reference

Christodoulakis, N, Kalyvitis, S and Karamouzis, N. 1994. 'Efficiency and Expectations Revisited: A Foreign Exchange Market with Bayesian Players'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1016