Fratzscher, Marcel; Rime, Dagfinn; Sarno, Lucio; Zinna, … - Banca d'Italia - 2014
The scapegoat theory of exchange rates (Bacchetta and van Wincoop 2004, 2013) suggests that market participants may … fluctuations at times when exchange rates are driven by unobservable shocks. Using novel survey data that directly measure foreign … exchange scapegoats for 12 exchange rates, we find empirical evidence that supports the scapegoat theory. The resulting models …