Abstract
Recent developments in international finance have emphasised the non-homogeneous nature of the actors in the exchange-rate market, distinguishing, for instance, between fundamentalists and chartists (Frankel and Froot, 1987b). In a parallel development, the availability of data on exchange-rate expectations has led to an examination of the question of whether long-term expectations are stabilising or destabilising compared to short-term expectations. ‘Destabilising’ was taken to mean the existence of ‘bandwagon’ effects, possibly due to the existence of chartists. Frankel and Froot (1987a) found evidence that long-term expectations (of over a year) exhibited a return to a mean, whereas short-term expectations exhibited a ‘bandwagon’ effect.
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