An exploration of the forward premium puzzle in currency markets
Publication
, Journal Article
Bansal, R
Published in: Review of Financial Studies
January 1, 1997
A standard empirical finding is that expected changes in exchange rates and interest rate differentials across countries are negatively related, implying that uncovered interest rate parity is violated in the data. This article provides new empirical evidence that suggests that violations of uncovered interest rate parity, and its economic implications, depend on the sign of the interest rate differential A framework related to term structure models is developed to account for the puzzling relationship between expected changes in exchange rates and interest rate differentials. Estimation results suggest that a particular term structure model can account for the puzzling empirical evidence.
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Published In
Review of Financial Studies
DOI
ISSN
0893-9454
Publication Date
January 1, 1997
Volume
10
Issue
2
Start / End Page
369 / 403
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment
- 1402 Applied Economics
- 1401 Economic Theory
Citation
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Bansal, R. (1997). An exploration of the forward premium puzzle in currency markets. Review of Financial Studies, 10(2), 369–403. https://doi.org/10.1093/rfs/10.2.369
Bansal, R. “An exploration of the forward premium puzzle in currency markets.” Review of Financial Studies 10, no. 2 (January 1, 1997): 369–403. https://doi.org/10.1093/rfs/10.2.369.
Bansal R. An exploration of the forward premium puzzle in currency markets. Review of Financial Studies. 1997 Jan 1;10(2):369–403.
Bansal, R. “An exploration of the forward premium puzzle in currency markets.” Review of Financial Studies, vol. 10, no. 2, Jan. 1997, pp. 369–403. Scopus, doi:10.1093/rfs/10.2.369.
Bansal R. An exploration of the forward premium puzzle in currency markets. Review of Financial Studies. 1997 Jan 1;10(2):369–403.
Published In
Review of Financial Studies
DOI
ISSN
0893-9454
Publication Date
January 1, 1997
Volume
10
Issue
2
Start / End Page
369 / 403
Related Subject Headings
- Finance
- 3801 Applied economics
- 3502 Banking, finance and investment
- 1502 Banking, Finance and Investment
- 1402 Applied Economics
- 1401 Economic Theory