Download the fantastic book titled The Forward Premium Puzzle Revisited written by Guy Meredith, available in its entirety in both PDF and EPUB formats for online reading. This page includes a concise summary, a preview of the book cover, and detailed information about "The Forward Premium Puzzle Revisited", which was released on 01 February 2002. We suggest perusing the summary before initiating your download. This book is a top selection for enthusiasts of the Business & Economics genre.
Summary of The Forward Premium Puzzle Revisited by Guy Meredith PDF
The forward premium is a notoriously poor predictor of exchange rate movements. This failure must reflect deviations from risk neutrality and/or rational expectations. In addition, a mechanism is needed that generates the appropriate correlation between the forward premium and shocks arising from risk premia or expectations errors. This paper extends McCallum (1994) to show how such a correlation can arise from the response of monetary policy to output and inflation, which are in turn affected by the exchange rate. The theoretical models considered all generate results that are consistent with the forward premium being a biased predictor of short-term exchange rate movements; the bias decreases, however, as the horizon of the exchange rate change lengthens. Another common feature of the models is that the true reduced-form equation for exchange rate changes contains variables other than the interest differential, providing a justification for "eclectic" relationships for forecasting exchange rates. The results, however, remain consistent with using uncovered interest parity as a building block for structural models.
Detail About The Forward Premium Puzzle Revisited PDF
- Author : Guy Meredith
- Publisher : International Monetary Fund
- Genre : Business & Economics
- Total Pages : 44 pages
- ISBN :
- Release Date : 01 February 2002
- PDF File Size : 16,8 Mb
- Language : English
- Rating : 4/5 from 21 reviews
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