Foreign Exchange Market Efficiency Under Flexible Exchange Rates: Comment.

The article comments on research by John Burt, Fred R. Kaen, and G. Geoffrey Booth--which is referred to as the BKB model--concerning foreign exchange market efficiency and the effectiveness of central bank interventions in stabilizing exchange rates. The spot exchange markets for Canadian dollars, German marks and British pounds are discussed, as well as a hypothesis that efficient market theory does not apply to the Canadian dollar because daily price variance did not fully respond to new information. Central bank intervention, institutional aspects of the Canadian exchange market are not believed to be the reason for the lack of efficacy in price changes. The conclusion is that the BKB model is not relevant to Canada.