This document discusses large swings in currency values driven by fundamentals. It references a 2006 discussion paper from the Tinbergen Institute that examines this topic. The paper finds that currency movements correlated strongly with economic fundamentals like GDP growth and interest rates over long periods, though fundamentals could not fully explain short-term fluctuations. Overall, the analysis showed that most currency variations were determined by underlying economic conditions rather than speculative forces.

1. TI 2006-086/2
Tinbergen Institute Discussion Paper
Large Swings in Currencies driven by
Fundamentals
Phornchanok Cumperayot1
Casper G. de Vries2
1 Chulalongkorn University,
2 Erasmus Universiteit Rotterdam, and Tinbergen Institute.

2. Tinbergen Institute
The Tinbergen Institute is the institute for
economic research of the Erasmus Universiteit
Rotterdam, Universiteit van Amsterdam, and Vrije
Universiteit Amsterdam.
Tinbergen Institute Amsterdam
Roetersstraat 31
1018 WB Amsterdam
The Netherlands
Tel.: +31(0)20 551 3500
Fax: +31(0)20 551 3555
Tinbergen Institute Rotterdam
Burg. Oudlaan 50
3062 PA Rotterdam
The Netherlands
Tel.: +31(0)10 408 8900
Fax: +31(0)10 408 9031
Most TI discussion papers can be downloaded at
http://www.tinbergen.nl.

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