Jiang, Zhengyang; Krishnamurthy, Arvind; Lustig, Hanno - National Bureau of Economic Research - 2023
We characterize the relation between exchange rates and their macroeconomic fundamentals without committing to a …-free bonds, the exchange rate appreciates in states that are worse for home investors than foreign investors. This prediction is … at odds with the empirical evidence and can only be overturned if the deviations from U.I.P. are large and exchange rates …