This paper provides empirical evidence for the difference in variance risk premium in the U.S. against other economies (VPI) having significant predictive power on monthly U.S. Dollar movements. The predictive power of VPI is rationalized by the variance risk premium's economic interpretation...

We present a novel predictor for the Dollar factor: variance risk premia imbalances (VPI), defined as the difference in variance risk premium in the U.S. and non-U.S. countries. We argue that VPI theoretically proxies the difference in volatility between U.S. and non-U.S. stochastic discount...

This paper analyses the role of asset prices in comparison to other factors, in particular exchange rates, as a driver of the US trade balance. It employs a Bayesian structural VAR model that requires imposing only a minimum of economically meaningful sign restrictions. We find that equity...