Excess returns, portfolio choices and exchange rate dynamics. The yen/dollar case, 1980-1998

摘要

This paper aims at identifying fundamentals determinants of flexible exchange rate dynamics by focusing on the monthly yen/dollar case. Since the seminal paper by Meese and Rogoff (1983) the question of whether floating exchange rates fluctuations can be related to macroeconomic variables is widely disputed in the empirical international finance literature. This paper cast serious doubts on the ability of international macroeconomics to explain and predict exchange rates dynamics. Indeed Meese and Rogoff showed that various time series models of major currencies exchange rates and their fundamental economic variables drawn from theoretical models failed to outperform the forecasts of a simple random walk. This result still holds as most of the following analysis failed to convincingly overturn Messe and Rogoff's conclusions (see the survey of Frankel and Rose, 1995).