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International Short Term Capital Movements: A Distributed Lag Model of Speculation in Foreign Exchange
Sven W. Arndt
Abstract
The role of speculative short term capital movements in balance of payments adjustment and in exchange market stability is examined. A theory of speculative behavior with a distributed lag model of expectation formation at its core is developed and empirically tested using the Canadian data for the period 1952-1960. Tests of an alternative but generically similar specification of the model are also presented and discussed.
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