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Forward and Spot Exchange Rates in a Multi-currency World

Hassan, Tarek A. - 2014

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

Exchange Rate Determination under Limits to CIP Arbitrage

Bacchetta, Philippe; Davis, Scott; Van Wincoop, Eric - National Bureau of Economic Research - 2024

operate through the swap market, which have no effect under perfect CIP arbitrage. More familiar financial shocks that impact …Recent theories of exchange rate determination have emphasized limited UIP arbitrage by international financial … institutions. New regulations since 2008 have also lead to imperfect CIP arbitrage. We show that under limited CIP arbitrage the …

Persistent link: https://www.econbiz.de/10015056203

A Reconsideration of the Uncovered Interest Parity Relationship

McCallum, Bennett T. - 1992

The paper first presents reasons for viewing the uncovered interest-parity (VIP) relationship as more important, in terms of economic analysis, than the unbiasedness of forward rates as predictors of future spot exchange rates. The two hypotheses are closely related, so that test rejections of...

Persistent link: https://www.econbiz.de/10012474860

Political vs. Currency Premia in International Real Interest Differentials : A Study of Forward Rates for 24 Countries

Frankel, Jeffrey A. - 1987

Different approaches to quantifying the degree of capital mobility for a cross-section of currencies -- particularly saving-investment correlations and tests of real interest parity - have appeared to show a surprisingly low degree of financial market integration. We use a new data set, forward...

Persistent link: https://www.econbiz.de/10012476759

A Reconsideration of the Failure of Uncovered Interest Parity for the U.S. Dollar

Engel, Charles; Kazakova, Ekaterina; Wang, Mengqi; … - National Bureau of Economic Research - 2021

We re-examine the time-series evidence for failures of uncovered interest rate parity on short-term deposits for the U.S. dollar versus major currencies of developed countries at short-, medium- and long-horizons. The evidence that interest rate differentials predict foreign exchange risk...

Persistent link: https://www.econbiz.de/10012482636

Covered Interest Parity Deviations : Macrofinancial Determinants

Cerutti, Eugenio M. - 2019

For several decades until the Global Financial Crisis (GFC), Covered Interest Parity (CIP) appeared to hold quite closely--even as a broad macroeconomic relationship applying to daily or weekly data. Not only have CIP deviations significantly increased since the GFC, but potential macrofinancial...

Persistent link: https://www.econbiz.de/10012480075

The High Frequency Effects of Dollar Swap Lines

Kekre, Rohan; Lenel, Moritz - National Bureau of Economic Research - 2023

We study the effects of dollar swap lines using high frequency responses in asset prices around policy announcements …. News about expanded dollar swap lines causes a reduction in liquidity premia, compression of deviations from covered …-term government bond prices is mixed. The cross-section of high frequency responses implies that swap lines affect the dollar factor …

Persistent link: https://www.econbiz.de/10014437032

Regime-Switching Behavior of the Term Structure of Forward Markets

Tchernykh, Elena - 2005

This paper presents techniques for modelling and estimating the behavior of financial market price or return differentials that follow non-linear regime-switching behaviour. The methodology to be used here is estimation of variants of threshold autoregression (TAR) models. In the basic model the...

Persistent link: https://www.econbiz.de/10012467162

Exchange Rate Dynamics and Learning

Gourinchas, Pierre-Olivier - 1996

Interest rate expectations are essential for exchange rate determination. Using a unique Survey data set on interest rate forecasts from 1986 to 1995 for G7 countries, we find that interest rate shocks were significantly more persistent in sample than expected by the market. This is consistent...

Persistent link: https://www.econbiz.de/10012473326

Deviations from Covered Interest Rate Parity

Du, Wenxin - 2017

arbitrage opportunities in one of the largest asset markets in the world. Contrary to the common view, these deviations for …

Persistent link: https://www.econbiz.de/10012455512

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