Overshooting in the foreign exchange market: Evidence from the 1970s |
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| Authors: | John Doukas Melhem Melhem |
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| Institution: | Concordia University, Montreal, Que., Canada H3G 1M8;International Monetary Fund, Washington, DC 20431, USA |
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| Abstract: | This paper analyzes the reaction of spot and forward exchange rates to unanticipated weekly money supply changes. The empirical results tend to support the (overshooting) hypothesis that equilibrium exchange-rate changes that occur in the short run in response to an unanticipated event exceed the equilibrium exchange-rate change in the long rung. |
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