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The Long Winter
G7 officials used to say that foreign exchange markets should be driven by fundamentals. It struck some as vacuous. What else could drive the largest part of the capital markets, a $6.6 trillion a day turnover prior to the crisis but macro? The challenge is really which macro factors should determine exchange rates. There seems to a rough consensus of the macroeconomic factors to be included. It is as if the variables of an equation generally agreed, and differences are in the co-efficient or the weighting given to each variable. There is also disagreement about how the variables and coefficients interact with each ... (full story)
