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According to the efficient market hypothesis, news in Tokyo is responsible for the exchange rate changes during the Tokyo market hours, while the U.S. news is responsible for changes in the New York hours. The intra-daily dynamics of the $/yen exchange rate from December 1931 to November 1933 is...
Persistent link: https://www.econbiz.de/10012476381
We present theory and evidence that challenges the view that forward premia contain little information regarding subsequent spot rate movements. Using weekly dollar-mark and dollar sterling data, we find that spot and forward exchange rates together are well represented by a vector error...
Persistent link: https://www.econbiz.de/10012474508
When estimates of variances are used to make asset allocation decisions, underestimates of population variances lead to lower expected utility than equivalent overestimates: a utility based criterion is asymmetric, unlike standard criteria such as mean squared error. To illustrate how to...
Persistent link: https://www.econbiz.de/10012474761
This paper investigates empirically the differences in time?series behavior of key economic aggregates under alternative exchange rate systems. We use a postwar sample of 49 countries to compare the behavior of output. consumption, trade flows, government consumption spending, and real exchange...
Persistent link: https://www.econbiz.de/10012476375
There are two main forces behind the large U.S. current account deficits. First, an increase in the U.S. demand for foreign goods. Second, an increase in the foreign demand for U.S. assets. Both forces have contributed to steadily increasing current account deficits since the mid--1990s. This...
Persistent link: https://www.econbiz.de/10012467548
This paper measures the effects of the risk of war on nine U.S. financial variables using a heteroskedasticity-based estimation technique. The results indicate that increases in the risk of war cause declines in Treasury yields and equity prices, a widening of lower-grade corporate spreads, a...
Persistent link: https://www.econbiz.de/10012469089
The modern notion of an international currency involves use in areas of international finance and trade that extend well beyond central banks' coffers. In addition to their important roles as foreign exchange reserves, international currencies are most frequently used to denominate corporate and...
Persistent link: https://www.econbiz.de/10012481057
Separate literatures study violations of uncovered interest parity using regression-based and portfolio-based methods. We propose a decomposition of these violations into a cross-currency, a between-time-and-currency, and a cross-time component that allows us to analytically relate...
Persistent link: https://www.econbiz.de/10012458373
We construct factors from a cross section of exchange rates and use the idiosyncratic deviations from the factors to forecast. In a stylized data generating process, we show that such forecasts can be effective even if there is essentially no serial correlation in the univariate exchange rate...
Persistent link: https://www.econbiz.de/10012460277
This paper evaluates out-of-sample exchange rate predictability of Taylor rule models, where the central bank sets the interest rate in response to inflation and either the output or the unemployment gap, for the euro/dollar exchange rate with real-time data before, during, and after the...
Persistent link: https://www.econbiz.de/10012460332