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Factor Model Forecasts of Exchange Rates

Engel, Charles M. - 2012

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/10013100676

International Trade in Durable Goods : Understanding Volatility, Cyclicality, and Elasticities

Engel, Charles M. - 2008

measures of consumption and prices to assess risk-sharing opportunities, as in the empirical work on the Backus-Smith puzzle …

Persistent link: https://www.econbiz.de/10012772731

Tests of International CAPM with Time-Varying Covariances

Engel, Charles M. - 2008

We perform maximum likelihood estimation of a model of international asset pricing based on CAPM. We test the restrictions imposed by CAPM against a more general asset pricing model. The quot;betasquot; in our CAPM vary over time from two sources -- the supplies of the assets (government...

Persistent link: https://www.econbiz.de/10012774612

On the Foreign-Exchange Risk Premium in Sticky-Price General Equilibrium Models

Engel, Charles M. - 2008

This paper investigates the behavior of the foreign exchange risk premium in two recent two-country intertemporal … risk premium in any general equilibrium model arises from the correlation of the exchange rate with consumption. In … arises endogenously because monetary shocks cause output and consumption to change. The size of the risk premium depends on …

Persistent link: https://www.econbiz.de/10012774818

Saving and Investment in an Open Economy with Non-Traded Goods

Engel, Charles M. - 2007

We examine a model of a small open economy in which there is free international mobility of financial capital, investment in capital goods and a non-traded good. Such an environment is rich enough to explain several phenomena that are inexplicable in more barren models. We suggest an explanation...

Persistent link: https://www.econbiz.de/10012777400

Expectations and Exchange Rate Policy

Devereux, Michael B. - 2006

Both empirical evidence and theoretical discussion have long emphasized the impact of %u201Cnews%u201D on exchange rates. In most exchange rate models, the exchange rate acts as an asset price, and as such responds to news about future returns on assets. But the exchange rate also plays a role...

Persistent link: https://www.econbiz.de/10012780131

Exchange Rates and Fundamentals

Engel, Charles M. - 2004

We show analytically that in a rational expectations present value model, an asset price manifests near random walk behavior if fundamentals are I(1) and the factor for discounting future fundamentals is near one. We argue that this result helps explain the well known puzzle that fundamental...

Persistent link: https://www.econbiz.de/10012785468

Liquidity and Exchange Rates : An Empirical Investigation

Engel, Charles M. - 2018

sovereign default risk and currency swap market frictions.Institutional subscribers to the NBER working paper series, and …

Persistent link: https://www.econbiz.de/10012906303

The Uncovered Interest Parity Puzzle, Exchange Rate Forecasting, and Taylor Rules

Engel, Charles M. - 2017

Recent research has found that the Taylor-rule fundamentals have power to forecast changes in U.S. dollar exchange rates out of sample. Our work casts some doubt on that claim. However, we find strong evidence of a related in-sample anomaly. When we include U.S. inflation in the well-known...

Persistent link: https://www.econbiz.de/10012942698

Portfolio Choice in a Monetary Open-Economy DSGE Model

Engel, Charles M. - 2010

this risk is hedged through nominal assets rather than through equities …

Persistent link: https://www.econbiz.de/10012761579