We propose an empirical model for deviations from long-run purchasing power parity (PPP) that simultaneously accounts for three key features: (i) adjustment toward PPP may occur via nominal exchange rates and relative prices at different speeds; (ii) different exchange rate regimes may generate...

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We examine the forecasting performance of a range of time-series models of the daily U.S. effective federal funds (FF) rate recently proposed in the literature. We find that: (1) most of the models and predictor variables considered produce satisfactory one-day-ahead forecasts of the FF rate,...

A growing body of empirical literature has established interest rate rules as a convenient way to model and interpret monetary policy. However, as pointed out by Rudebusch (1998), vector autoregression (VAR) models used to recover the central banks' reaction functions generally rely on the...

This paper investigates high-frequency (HF) market and limit orders in the U.S. Treasury market around major macroeconomic news announcements. BrokerTec introduced i-Cross at the end of 2007 and we use this exogenous event as an instrument to analyze the impact of HF activities on liquidity and...

This article examines empirically the dynamic relationship between spot and futures prices in stock index futures markets employing a class of nonlinear, regime‐switching‐vector‐equilibrium‐correction models, which is novel in this context. Using data for the S&P 500 and the FTSE 100...

We investigate the performance and risk of currency hedge funds using a large and unique consolidated currency hedge fund dataset. We find that a substantial number of hedge funds generate returns that exceed foreign exchange risk premia obtained through carry trades. The best alpha-generating...

We investigate the performance and risk of currency hedge funds using a large and unique consolidated currency hedge fund dataset. We find that a substantial number of hedge funds generate returns that exceed foreign exchange risk premia obtained through carry trades. The best alpha-generating...