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Burnside, Craig - National Bureau of Economic Research (NBER) - 2011

Carry trades, in which an investor borrows a low interest rate currency and lends a high interest rate currency, have been profitable historically. The risk exposure of carry traders might explain their high returns, but conventional models of risk do not work because traditional risk factors,...

Persistent link: https://www.econbiz.de/10009225820

Investor Overconfidence and the Forward Premium Puzzle

Hirshleifer, David; Burnside, Craig; Han, Bing; Wang, … - National Bureau of Economic Research (NBER) - 2010

. In the model, overconfident individuals overreact to their information about future inflation, which causes greater … overshooting in the forward rate than in the spot rate. Thus, when agents observe a signal of higher future inflation, the …

Persistent link: https://www.econbiz.de/10008634711

Government Finance in the Wake of Currency Crises

Eichenbaum, Martin; Burnside, Craig; Rebelo, Sergio - National Bureau of Economic Research (NBER) - 2003

crises; and (ii) what are the implications of different financing methods for post-crisis rates of inflation and depreciation …

Persistent link: https://www.econbiz.de/10005714247

The Returns to Currency Speculation

Eichenbaum, Martin; Burnside, Craig; Kleshchelski, Isaac; … - National Bureau of Economic Research (NBER) - 2006

Currencies that are at a forward premium tend to depreciate. This 'forward-premium puzzle' represents an egregious deviation from uncovered interest parity. We document the properties of returns to currency speculation strategies that exploit this anomaly. We show that these strategies yield...

Persistent link: https://www.econbiz.de/10005720206

The Forward Premium is Still a Puzzle

Burnside, Craig - National Bureau of Economic Research (NBER) - 2007

Lustig and Verdelhan (2007) argue that the excess returns to borrowing US dollars and lending in foreign currency "compensate US investors for taking on more US consumption growth risk," yet the stochastic discount factor corresponding to their benchmark model is approximately uncorrelated with...

Persistent link: https://www.econbiz.de/10005720819

Prospective Deficits and the Asian Currency Crisis

Eichenbaum, Martin; Burnside, Craig; Rebelo, Sergio - National Bureau of Economic Research (NBER) - 1998

the government cannot prevent a speculative attack, it can affect its timing. The longer the delay, the higher inflation …

Persistent link: https://www.econbiz.de/10005778078

On the Fiscal Implications of Twin Crises

Eichenbaum, Martin; Burnside, Craig; Rebelo, Sergio - National Bureau of Economic Research (NBER) - 2001

inflation and depreciation rates. We use a first-generation type model of speculative attacks which has four key features: (i … the crises; (iii) a portion of the government's liabilities are not indexed to inflation; and (iv) there are nontradable … account for the high rates of devaluation and moderate rates of inflation often observed in the wake of currency crises. We …

Persistent link: https://www.econbiz.de/10005050301

Hedging and Financial Fragility in Fixed Exchange Rate Regimes

Eichenbaum, Martin; Burnside, Craig; Rebelo, Sergio - National Bureau of Economic Research (NBER) - 1999

Currency crises that coincide with banking crises tend to share four elements. First, governments provide guarantees to domestic and foreign bank creditors. Second, banks do not hedge their exchange rate risk. Third, there is a lending boom before the crises. Finally, when the currency/banking...

Persistent link: https://www.econbiz.de/10005575685

On the Fundamentals of Self-Fulfilling Speculative Attacks

Eichenbaum, Martin; Burnside, Craig; Rebelo, Sergio T. - National Bureau of Economic Research (NBER) - 2000

This paper proposes a theory of twin banking-currency crises in which both fundamentals and self-fulfilling beliefs play crucial roles. Fundamentals determine whether crises will occur. Self-fulfilling beliefs determine when they occur. The fundamental that causes twin crises' is government...

Persistent link: https://www.econbiz.de/10005579987

Understanding the Forward Premium Puzzle: A Microstructure Approach

Eichenbaum, Martin; Burnside, Craig; Rebelo, Sergio - National Bureau of Economic Research (NBER) - 2007

High-interest-rate currencies tend to appreciate relative to low-interest-rate currencies. We argue that adverse-selection problems between participants in foreign exchange markets can account for this 'forward premium puzzle.' The key feature of our model is that the adverse selection problem...

Persistent link: https://www.econbiz.de/10005580387