Three essays on exchange-rate misalignment

Abstract

Theories of exchange-rate determination have generated a vast theoretical and empirical literature. This thesis adds to that body of literature by asking three questions. (i) How do policymakers respond to exchange-rate misalignment? (ii) How does misalignment affect the decisions of financial-market participants? (iii) What do exchange-rate dynamics reveal about the choices of investors in the face of currency risk? These three questions are tackled with studies that offer broad and tractable conclusions and contribute to furthering the current field of research