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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

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

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

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

The Information in Long-Maturity Forward Rates : Implications for Exchange Rates and the Forward Premium Anomaly

Boudoukh, Jacob - 2005

The forward premium anomaly is one of the most robust puzzles in financial economics. We recast the underlying parity relation in terms of cross-country differences between forward interest rates rather than spot interest rates with dramatic results. These forward interest rate differentials...

Persistent link: https://www.econbiz.de/10012466831

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

Is it Risk? Explaining Deviations from Uncovered Interest Parity

Cumby, Robert E. - 1987

This paper analyzes ex-ante returns to forward speculation and asks if these returns can be explained by models of a foreign exchange risk premium. After presenting evidence that both nominal and real expected speculative profits are non-zero, the paper examines if real returns to forward...

Persistent link: https://www.econbiz.de/10012476688

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

Uncovered Interest Parity, Forward Guidance, and the Exchange Rate

Galí, Jordi - 2020

Under uncovered interest parity (UIP), the size of the effect on the real exchange rate of an anticipated change in real interest rate differentials is invariant to the horizon at which the change is expected. Empirical evidence using US, euro area and UK data points to a substantial deviation...

Persistent link: https://www.econbiz.de/10012479321

Five Facts about the UIP Premium

Kalemli-Ozcan, Sebnem; Varela, Liliana - National Bureau of Economic Research - 2021

We document five novel facts about Uncovered Interest Parity (UIP) deviations vis-à-vis the U.S. dollar for 34 currencies of advanced economies and emerging markets, using survey data on expected exchange rate. First, the UIP premium co-moves with global risk perception (VIX) for all...

Persistent link: https://www.econbiz.de/10012585407