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Prominent Numbers and Ratios in Exchange Rate Determination: Field and Laboratory Evidence

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  • von Hagen, Jürgen
  • Kube, Sebastian
  • Kaiser, Johannes
  • Selten, Reinhard
  • Pope, Robin

Abstract

In the decision-making process, there is a stage when choosers evaluate alternatives. Evaluation is complex especially when it involves the future exchange rate. In the complexity of predicting the future exchange rate, choosers may use prominent numbers and ratios. We furnish field and experimental evidence of major effects on exchange rate determination from prominent numbers and ratios that constitute nominal equalities and historical benchmarks. Theorizing and estimation of exchange rates can be enhanced via SKAT, the Stages of Knowledge Ahead Theory that allows prominent numbers and prominent ratios to be taken into account consistently in constructing decision models.

Suggested Citation

  • von Hagen, Jürgen & Kube, Sebastian & Kaiser, Johannes & Selten, Reinhard & Pope, Robin, 2006. "Prominent Numbers and Ratios in Exchange Rate Determination: Field and Laboratory Evidence," Bonn Econ Discussion Papers 29/2006, University of Bonn, Bonn Graduate School of Economics (BGSE).
    • Handle: RePEc:zbw:bonedp:292006
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    More about this item

    Keywords

    nominalism; money illusion; unpredictability; experiment; SKAT the Stages of Knowledge Ahead Theory; prominent numbers; prominent ratios;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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