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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

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

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

The Cross-Section of Foreign Currency Risk Premia and Consumption Growth Risk : A Reply

Lustig, Hanno - 2008

The U.S. consumption growth beta of an investment strategy that goes long in high interest rate currencies and short in low interest rate currencies is large and significant. The price of consumption risk is significantly different from zero, even after accounting for the sampling uncertainty...

Persistent link: https://www.econbiz.de/10012464835

The Cross-Section of Currency Risk Premia and US Consumption Growth Risk

Lustig, Hanno - 2005

Aggregate consumption growth risk explains why low interest rate currencies do not appreciate as much as the interest rate differential and why high interest rate currencies do not depreciate as much as the interest rate differential. We sort foreign T-bills into portfolios based on the nominal...

Persistent link: https://www.econbiz.de/10012467581

Currency Risk Premiums : A Multi-horizon Perspective

Chernov, Mikhail; Dahlquist, Magnus - National Bureau of Economic Research - 2023

We review the literature on multi-horizon currency risk premiums. We show how the multi-horizon implications arise from the classic present-value relationship. We further show how these implications manifest themselves in the interaction between bond and currency risk premiums. This link is...

Persistent link: https://www.econbiz.de/10014322805

The Term Structure of the Forward Premium

Hakkio, Craig S. - 1980

. The paper proposes an equilibrium theory of the term structure of the forward premium. By combining the theory of the term … expression for the expected one month forward premium. The theory will then impose highly non-linear cross equation restrictions … indicate that the data are consistent with the theory for Germany and inconsistent with the theory for Canada …

Persistent link: https://www.econbiz.de/10012478719

Affine Models of Currency Pricing

Backus, David - 1996

characterize the risk premium in a general arbitrage-free setting and describe the features a theory must have to account for the …-varying risk premium, but theory has been largely unsuccessful in producing a risk premium with the requisite properties. We …

Persistent link: https://www.econbiz.de/10012473222

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

Exchange Rates, Interest Rates, and the Risk Premium

Engel, Charles - 2015

The well-known uncovered interest parity puzzle arises from the empirical regularity that, among developed country pairs, the high interest rate country tends to have high expected returns on its short term assets. At the same time, another strand of the literature has documented that high real...

Persistent link: https://www.econbiz.de/10012457626

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