Using survey data, we document that predictable exchange rate forecast errors are responsible for the uncovered-interest-parity (UIP) puzzle and its reversal at longer horizons. We develop a general-equilibrium model based on shock misperception and over-extrapolative beliefs that reconciles...

This paper re-investigates the implications of monetary policy rules on changes in exchange rate, in a risk-adjusted, uncovered interest parity model with unrestricted parameters, emphasizing the importance of modeling market expectations of monetary policy. I use consensus forecasts as a proxy...

Empirical evidence suggests that a monetary shock induces the exchange rate to overshoot its long-run level. The estimated magnitude and timing of the overshooting, however, varies across studies. This paper generates delayed overshooting in a new Keynesian model of a small open economy by...

Abstracting from self-protection and self-insurance e ects of export produc-tion choices, exporting rms usually have access to a number of risk sharingmarkets that have an efficient risk management role. Two of the most strikingresults achieved from the existence of risk sharing markets are the...

This study analyzes the impact of the COVID-19 pandemic on exchange rates based on a comprehensive set of survey forecasts for more than 50 currency pairs. At the first stage, we assess whether the policy to manage the COVID-19 pandemic affects the expected path of exchange rates over the medium...

We propose a model in which sticky expectations concerning shortterm interest rates generate joint predictability patterns in bond and currency markets. Using our calibrated model, we quantify the effect of this channel and find that it largely explains why short rates and yield spreads predict...

This paper employs a risk-augmented asset price model of the exchange rate to compare the risk and return characteristics of a range of Asia-Pacific USD currency pairs. The Asia-Pacific currencies include a full range of exchange rate regimes, so provide a broad perspective of exchange rate...

In this paper, we construct alternative theoretical models for exchange rates by introducing additional risk factors, based on the volatility of macroeconomic fundamentals. The modified flexible-price monetary model is used to characterize the long-run equilibrium of exchange rates, while the...

We analyse the workings of a simple non-linear exchange rate model in which agents hold different beliefs about the underlying model. We distinguish between "chartists" and "fundamentalists". The non-linearities in the model originate from transactions costs and from the existence of non-linear...

Using monthly data for four selected emerging economies, we find that sterilised central bank foreign exchange intervention has little systematic influence on near-term nominal exchange rate expectations in the direction intended by the central banks. In other words, central bank dollar...