Empirical Tests of Exchange Rate Theory

Eric O'N. Fisher, California Polytechnic State University - San Luis Obispo

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Copyright © 2007 Springer. The original publication is available at http://dx.doi.org/10.1007/978-3-540-68660-6.

Abstract

There have been very few direct applications of experimental techniques in macroeconomics for two main reasons. First, macroeconomics is about the interaction between markets, and it is not easy to design an elegant treatment that gets at the essence of how a national economy functions. Second, there is a vestigial prejudice that favors econometrics over putatively unorthodox empirical approaches. Still, the Nobel Prize-winning economist Edward Prescott is alleged to have said, “Don’t regress; progress!”