This paper proposes a structural model of exchange rates where agents formulate their one-step ahead predictions based on social learning process and higher order beliefs. Individual choices are then aggregated and plugged into a rather standard macroeconomic model to derive the dynamics of exchange rates. Bayesian estimation of the structural parameters is implemented exploiting Foreign exchange Consensus Survey data of heterogeneous forecasts and fundamentals. Results show that higher order beliefs accounts for a large part of the total value, while public information play the most important role in determining individual expectations. Although the precision of the private signal is larger than the public one, information publicly revealed does exert a disproportionate influence, and differences in the estimated signals determine the equilibrium strategy of each agent as a combination between personal beliefs and higher order expectations.
Pignataro, Giuseppe, Davide, Raggi e Francesca, Pancotto. "Social Learning and Higher Order Beliefs:A Structural Model of Exchange Rates Dynamics" Working paper, 2015.
Social Learning and Higher Order Beliefs: A Structural Model of Exchange Rates Dynamics
Francesca Pancotto
2015
Abstract
This paper proposes a structural model of exchange rates where agents formulate their one-step ahead predictions based on social learning process and higher order beliefs. Individual choices are then aggregated and plugged into a rather standard macroeconomic model to derive the dynamics of exchange rates. Bayesian estimation of the structural parameters is implemented exploiting Foreign exchange Consensus Survey data of heterogeneous forecasts and fundamentals. Results show that higher order beliefs accounts for a large part of the total value, while public information play the most important role in determining individual expectations. Although the precision of the private signal is larger than the public one, information publicly revealed does exert a disproportionate influence, and differences in the estimated signals determine the equilibrium strategy of each agent as a combination between personal beliefs and higher order expectations.File | Dimensione | Formato | |
---|---|---|---|
2015-24.pdf
Open access
Descrizione: Working Paper
Tipologia:
AO - Versione originale dell'autore proposta per la pubblicazione
Dimensione
472.09 kB
Formato
Adobe PDF
|
472.09 kB | Adobe PDF | Visualizza/Apri |
Pubblicazioni consigliate
I metadati presenti in IRIS UNIMORE sono rilasciati con licenza Creative Commons CC0 1.0 Universal, mentre i file delle pubblicazioni sono rilasciati con licenza Attribuzione 4.0 Internazionale (CC BY 4.0), salvo diversa indicazione.
In caso di violazione di copyright, contattare Supporto Iris