Appendix

Firstly, combine the equations that describe the money and the international asset markets in equilibrium, i.e., (1)( 2), and solve for the exchange rate:

(76)

Secondly, substitute the expectations formed by technical and fundamental analyses, i.e., (6) and (9), into market expectations in (4):

(77)

and, then, substitute the longperiod moving average in (7) into (77):

(78)

Thirdly, substitute (78) into (76):

(79)

and, then, solve for the exchange rate:

(80)

Fourthly, the exchange rate in longrun equilibrium, according to (15) and (19), is

(81)

which is substituted into (80):

(82)

Finally, substitute the weight function in (5) into (82), and (73) in Section 3.5 is derived.

By Mikael Bask and Carina Selander