Replication data for: Exchange Rates, Interest Rates, and the Risk Premium
Principal Investigator(s): View help for Principal Investigator(s) Charles Engel
Version: View help for Version V1
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20121365_data_programs | 10/19/2021 03:23:PM | ||
LICENSE.txt | text/plain | 14.6 KB | 10/11/2019 07:59:PM |
Project Citation:
Engel, Charles. Replication data for: Exchange Rates, Interest Rates, and the Risk Premium. Nashville, TN: American Economic Association [publisher], 2016. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-11. https://doi.org/10.3886/E112893V1
Project Description
Summary:
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The uncovered interest parity puzzle concerns the empirical regularity that high interest rate countries tend to have high expected returns on short term deposits. A separate puzzle is that high real interest rate countries tend to have currencies that are stronger than can be accounted for by the path of expected real interest differentials under uncovered interest parity. These two findings have apparently contradictory implications for the relationship of the foreign-exchange risk premium and interest-rate differentials. We document these puzzles, and show that existing models appear unable to account for both. A model that might reconcile the findings is discussed. (JEL E43, F31, G15)
Scope of Project
Subject Terms:
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convenience yield;
exchange rates;
foreign exchange risk premium;
interest parity;
excess volatility;
Fama puzzle
JEL Classification:
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E43 Interest Rates: Determination, Term Structure, and Effects
F31 Foreign Exchange
G15 International Financial Markets
E43 Interest Rates: Determination, Term Structure, and Effects
F31 Foreign Exchange
G15 International Financial Markets
Data Type(s):
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program source code;
aggregate data
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