Abstract
This paper finds strong evidence of a positive relationship between currency risk premia and real exchange rate swings, significant at the 1% if not 0.1% level, for three US$ exchange rate samples. The risk premia are measured using survey data on traders' exchange rate forecasts. This circumvents the need for an auxiliary hypothesis of rationality and enables more direct focus on risk behavior. The analysis is conducted using theI(2) cointegrated VAR, which allows for time-varying trends in the variables. Evidence of persistent changes is found for interest rates, prices, and nominal and real exchange rates. Interest rate shocks appear to drive the system, whereas expectations are correcting only in the longer run.
Publisher
Cambridge University Press (CUP)
Subject
Economics and Econometrics
Cited by
32 articles.
订阅此论文施引文献
订阅此论文施引文献，注册后可以免费订阅5篇论文的施引文献，订阅后可以查看论文全部施引文献
1. The Canadian–US dollar exchange rate over the four decades of the post‐Bretton Woods float: An econometric study allowing for structural breaks;Metroeconomica;2022-03-14
2. Index;How Novelty and Narratives Drive the Stock Market;2021-09-30
3. Bibliography;How Novelty and Narratives Drive the Stock Market;2021-09-30
4. Unscheduled Events from RavenPack;How Novelty and Narratives Drive the Stock Market;2021-09-30
5. RavenPack Terms for Event Output Record;How Novelty and Narratives Drive the Stock Market;2021-09-30