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1 of 2 people found the following review helpful
2.0 out of 5 stars For economists only, 19 Nov 2012
W. Petrie - See all my reviews
This review is from: Imperfect Knowledge Economics: Exchange Rates and Risk (Hardcover)
According to the sleeve, this book will be essential reading for economists, policymakers and investors. As a retired mathematician and reasonably successful investor, I bought it in the hope of some quantitative insights into foreign exchange forecasting. The first part of the book (chapters 1 to 8) essentially discredits the already discredited rational expectations hypotheses, and can be safely ignored by practising investors. The rest of the book has some useful insights into the time-varying role of economic fundamentals in the setting of exchange rates, and may be worth reading. I was disappointed with the book, however, for two reasons.
First, although the authors put forward plausible economic hypotheses regarding the reasons for exchange rates deviating from PPP, at no point do they attempt to quantify their assumptions with enumerated algorithms. This is in contrast to De Grauwe and Grimaldi (2006), who had the courage to develop specific simulations.
Second, the presentation is (to my mind) very obscure, due to an over-reliance on needlessly cryptic variable and parameter symbols, and a neglect to develop intermediate appropriately-named variable structures (objects). The concepts are not difficult, after all. As an example, on page 267, equation 14.12 has about fourteen (!) different variables and constants. This practise is of course derived from mathematics, but carried to an excessive extent. (The most obscurely-written mathematical textbook I have is `A guide to Feynman diagrams in the Many-Body Problem'. The longest equation in this book has six variables.) The presentation will deter all but the most determined reader, and it seems unlikely that busy investors will have the time to absorb the contents.
A more appropriate book for investors is `Exchange Rate Determination' by Rosenberg, supported for additional indicators by `Sentiment in the Forex Market' by Saettle.
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Imperfect Knowledge Economics: Exchange Rates and Risk
Imperfect Knowledge Economics: Exchange Rates and Risk by Michael D. Goldberg (Hardcover - 2 Sep 2007)
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