This paper investigates the forecasting ability of survey data on exchange rate expectations with multiple forecast horizons. The survey forecasts are on the exchange rates of five Central and Eastern European currencies: Czech Koruna, Hungarian Forint, Polish Zloty, Romanian Leu and Slovakian...

We construct multi-currency models with stochastic volatility and correlated stochastic interest rates with a full matrix of correlations. We first deal with a foreign exchange (FX) model of Heston-type, in which the domestic and foreign interest rates are generated by the short-rate process of...

We investigate in this paper the skirmishes that the US dollar and the Euro had from 2007 to 2011 and, in particular, the two distinct sharp falls that the single currency had in 2008 and 2010. We basically consider how impulses coming from domestic money markets impact on the USD/EUR exchange...

Conducting a Beveridge-Nelson decomposition on exchange rates reveals that the prospective interest rate differential -- the expected infinite sum of future interest rate differentials (i.e., the "prospective'') -- can help predict foreign exchange market excess returns. We find that the...

We construct a multi-country affine term structure model that contains unspanned macroeconomic and foreign exchange risks. The canonical version of the model is derived and is shown to be easy to estimate. We show that it is important to impose restrictions (including global asset pricing, carry...

This paper proposes a novel asymptotic least-squares estimator of multi-country Gaussian dynamic term structure models that is easy to compute and asymptotically efficient, even when the number of countries is relatively large - a situation in which other recently proposed approaches lose their...

We study the link between the volatility of exchange rates and interest rate differentials (IRD), motivated by the importance of currency carry trade activities in exchange rate dynamics. We examine this link by means of an extended stochastic volatility model, for which we detail an efficient...

We document that the relationship between currencies and risk premia has changed dramatically since the financial crisis: the covariance of equity returns and exchange rates sharply increased after the crisis. Since 2008, 21 per cent of the variation in monthly currency appreciations can be...

In this paper, we propose an unified econometric strategy to revisit the predictive contentof interest rates for exchange rate returns. The novelty of our approach is to take into account dependencies of higher orders by allowing for a time-varying asymmetry componentin the distribution of...