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Topic: Miscellaneous
Number of pages / Number of words: 2 / 489
Essay's paper body

If PPP were built from a micro-

foundation choice-based model (where demand-side ef-fects influence

saving/investment and interest rates), I suspect that we might see a real

conver-gence toward understanding the excess returns puzzle.

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Imperfect Knowledge

William Strauss

The paper is a clear breath of "dirty" air in the sterile world of perfect

foresight. The authors offer a well worked out model of how agents persistently

bid the exchange rate away from the expected long-run equilibrium rate. It

seems intuitively comfortable to see the mathematical justification for the

unexplained excess returns to be a function of the distance from the bench-mark


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General points of the essay

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