Open AccessPosted Content
Exchange Rates and Interest Parity
TLDR
The authors surveys recent theoretical and empirical contributions on foreign exchange rate determination, and examines monetary models under uncovered interest parity and rational expectations and then considers deviations from UIP/rational expectations: foreign exchange risk premium, private information, near-rational expectations, and peso problems.Abstract:
This chapter surveys recent theoretical and empirical contributions on foreign exchange rate determination. The chapter first examines monetary models under uncovered interest parity and rational expectations, and then considers deviations from UIP/rational expectations: foreign exchange risk premium, private information, near-rational expectations, and peso problems.read more
Citations
More filters
Reference BookDOI
Dynamics and Control
TL;DR: 1. Control Methodology 2. Dynamical Systems 3. Applications to Social and Environmental Problems 4.
Journal ArticleDOI
Crash-Neutral Currency Carry Trades
TL;DR: In this paper, the authors compute returns to crash-hedged portfolios and demonstrate that the high returns to carry trades are not due to peso problems, but due to violations of uncovered interest rate parity in G10 currencies.
Journal ArticleDOI
Exchange Rates, Interest Rates, and the Risk Premium
TL;DR: The uncovered interest parity puzzle as mentioned in this paper concerns the empirical regularity that high interest rate countries tend to have high expected returns on short term deposits, and a separate puzzle is that high real interest rate country tends to have currencies that are stronger than can be accounted for by the path of expected real interest differentials under uncovering interest parity, which has apparently contradictory implications for the relationship of the foreign exchange risk premium and interest-rate differentials.
Posted Content
Is foreign exchange intervention effective? The Japanese experiences in the 1990s
TL;DR: Monetary History, Exchange Rates and Financial Markets as discussed by the authors is an impressive collection of original papers in honour of Charles Goodhart's outstanding contribution to monetary economics and policy, which includes a summary of current thinking on his own research subjects and include perspectives on controversies surrounding them.
References
More filters
Posted Content
Comparing Predictive Accuracy
TL;DR: The authors describes the advantages of these studies and suggests how they can be improved and also provides aids in judging the validity of inferences they draw, such as multiple treatment and comparison groups and multiple pre- or post-intervention observations.
Journal ArticleDOI
Expectations and Exchange Rate Dynamics
TL;DR: In this paper, the authors developed a theory of exchange rate movements under perfect capital mobility, a slow adjustment of goods markets relative to asset markets, and consistent expectations, and showed that along that path a monetary expansion causes the exchange rate to depreciate.
Journal ArticleDOI
Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework
Larry G. Epstein,Stanley E. Zin +1 more
TL;DR: In this paper, a class of recursive, but not necessarily expected utility, preferences over intertemporal consumption lotteries is developed, which allows risk attitudes to be disentangled from the degree of inter-temporal substitutability, leading to a model of asset returns in which appropriate versions of both the atemporal CAPM and the inter-time consumption-CAPM are nested as special cases.
Posted Content
By Force of Habit: A Consumption-Based Explanation of Aggregate Stock Market Behavior
TL;DR: In this paper, a consumption-based model is proposed to explain a wide variety of dynamic asset pricing phenomena, including the procyclical variation of stock prices, the long-term horizon predictability of excess stock returns, and the countercyclical variations of stock market volatility.
Posted Content
The Dividend-Price Ratio and Expectations of Future Dividends and Discount Factors
TL;DR: In this article, a linearization of a rational expectations present value model for corporate stock prices produces a simple relation between the log dividend-price ratio and mathematical expectations of future log real dividend changes and future real discount rates.