Jiang, Zhengyang; Krishnamurthy, Arvind; Lustig, Hanno; … - National Bureau of Economic Research - 2024
. The convenience yield on dollar bonds enters as a stochastic wedge in the Euler equations for exchange rate determination …. This wedge reduces the pass-through from marginal utility shocks to exchange rate movements, resolving the exchange rate … volatility puzzle. The wedge also exposes the dollar's exchange rate to convenience yield shocks, giving rise to exchange rate …