Tourism is a major source of service receipts for many countries, including Taiwan. The two leading tourism countries for Taiwan are Japan and USA, which are sources of short and long haul tourism, respectively. As a strong domestic currency can have adverse effects on international tourist...

This paper introduces state-uncertainty preferences into the Lucas (1982) economy, showing that this type of preferences helps to explain the exchange rate risk premium. Under these preferences we can distinguish between two factors driving the exchange rate risk premium: “macroeconomic...

This paper estimates the dynamics of adjustment to long run purchasing power parity (PPP) using data for 18 mayor bilateral US dollar exchange rates, over the post-Bretton Woods period, in a non-linear framework. We use new unit root and cointegration tests that do not assume a specific...

Most dynamic equilibrium models of exchange rate are not able to generate monthly time series with the typical properties of actual exchange rate. If the exogenous endowments in an equilibrium exchange rate model contain seasonal variations, then the exchange rate will as well. In this paper, we...

The goal of this paper is to identify the main determinants of the risk premium in some European currency markets just before the EMU. To that extent, we start from Lucas (1982) exchange rate model and derive an analytical expression for the forward premium. This expression includes money and...

The two-country monetary model has become a fundamental tool for explaining the behavior of the exchange rate. However, the popularity of this approach is not justified by its empirical support. One of the reasons for the empirical “failure” of exchange rate models could be the econometric...

The goal of this paper is to identify the main determinants of the risk premium in some European currency markets just before the EMU. To do this the authors propose an exchange rate model and derive a formula for the forward premium. This formula includes money and production variables and is...

Several methods have recently been proposed in the ultra high frequency financial literature to remove the effects of microstructure noise and to obtain consistent estimates of the integrated volatility (IV) as a measure of ex-post daily volatility. Even bias-corrected and consistent realized...