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International Risk Sharing is Better Than You Think (or Exchange Rates are Much Too Smooth)
Brandt, Michael W. - 2001
Exchange rates depreciate by the difference between the domestic and foreign marginal utility growths. Exchange rates vary a lot , as much as 10% per year. However, equity premia imply that marginal utility growths vary much more, by at least 50% per year. This means that marginal utility...
Persistent link: https://www.econbiz.de/10012470316
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Money, Interest Rates, and Exchange Rates with Endogenously Segmented Asset Markets
Alvarez, Fernando - 2000
This paper analyzes the effects of money injections on interest rates and exchange rates in a model in which agents must pay a Baumol-Tobin style fixed cost to exchange bonds and money. Asset markets are endogenously segmented because this fixed cost leads agents to trade bonds and money only...
Persistent link: https://www.econbiz.de/10012470866
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Exchange Rate Variability And Asset Trade
Persson, Torsten - 1989
In discussions about different international monetary arrangements it is often maintained that exchange rate variability has a negative influence on international trade and foreign investment. This paper addresses one specific aspect of this general issue, namely the effect of exchange rate...
Persistent link: https://www.econbiz.de/10012476246
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Asset Markets, Exchange Rates and the Balance of Payments
Frenkel, Jacob A. - 1984
This paper, written as a chapter for a Handbook of International Economics, reviews developments in the theory of … of exchange rate theory, starting with the monetary approach to exchange rate determination. Issues discussed in this … framework that views the question of exchange rate determination as part of the general theory of the determination of asset …
Persistent link: https://www.econbiz.de/10012477808
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Implications of Asset Market Data for Equilibrium Models of Exchange Rates
Jiang, Zhengyang; Krishnamurthy, Arvind; Lustig, Hanno - National Bureau of Economic Research - 2023
We characterize the relation between exchange rates and their macroeconomic fundamentals without committing to a specific model of preferences, endowment or menu of traded assets. When investors can trade home and foreign currency risk-free bonds, the exchange rate appreciates in states that are...
Persistent link: https://www.econbiz.de/10014436982
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The World Price of Foreign Exchange Risk
Dumas, Bernard - 1993
CAPM incorporates rewards for exchange rate risk, in addition to the traditional reward for market-covariance risk. The aim … securities. The test being conducted is a test of a conditional version of the CAPM. It builds on the recent empirical literature … variables, such as interest rates and dividend yields. All previous tests of the international CAPM with exchange risk premia …
Persistent link: https://www.econbiz.de/10012474487
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Equilibrium Exchange Rate Hedging
Black, Fischer - 1989
In a one-period model where each investor consumes a single good, and where borrowing and lending are private and real, there is a universal constant that tells how much each investor hedges his foreign investments. The constant depends only on average risk tolerance across investors. The same...
Persistent link: https://www.econbiz.de/10012476106
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Asset Prices and Exchange Rates
Pavlova, Anna - 2003
the data, and the point estimates are in line with the implications of our theory. Furthermore, the uncovered interest … and identify economic environments under which they exhibit a home bias, and demonstrate that an international CAPM …
Persistent link: https://www.econbiz.de/10012468864
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Endogenous Pricing to Market and Financing Costs
Aizenman, Joshua - 2000
This paper studies the endogenous determination of pricing to market, in a model with time dependent transportation costs, where the future terms of trade are random. Allowing time dependent transportation costs adds a dimension of investment to the pre-buying of imports, implying that financial...
Persistent link: https://www.econbiz.de/10012470823
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Dynamic Equilibrium and Volatility in Financial Asset Markets
Ait-Sahalia, Yacine - 1996
This paper develops and estimates a continuous-time model of a financial market where investors' trading strategies and the specialist's rule of price adjustments are the best response to each other. We examine how far modeling market microstructure in a purely rational framework can go in...
Persistent link: https://www.econbiz.de/10012473380