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On The Foreign Exchange Risk Premium In A General Equilibrium Model
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Book Synopsis Imperfect Knowledge Economics by : Roman Frydman
Download or read book Imperfect Knowledge Economics written by Roman Frydman and published by Princeton University Press. This book was released on 2023-09-26 with total page 368 pages. Available in PDF, EPUB and Kindle. Book excerpt: Posing a major challenge to economic orthodoxy, Imperfect Knowledge Economics asserts that exact models of purposeful human behavior are beyond the reach of economic analysis. Roman Frydman and Michael Goldberg argue that the longstanding empirical failures of conventional economic models stem from their futile efforts to make exact predictions about the consequences of rational, self-interested behavior. Such predictions, based on mechanistic models of human behavior, disregard the importance of individual creativity and unforeseeable sociopolitical change. Scientific though these explanations may appear, they usually fail to predict how markets behave. And, the authors contend, recent behavioral models of the market are no less mechanistic than their conventional counterparts: they aim to generate exact predictions of "irrational" human behavior. Frydman and Goldberg offer a long-overdue response to the shortcomings of conventional economic models. Drawing attention to the inherent limits of economists' knowledge, they introduce a new approach to economic analysis: Imperfect Knowledge Economics (IKE). IKE rejects exact quantitative predictions of individual decisions and market outcomes in favor of mathematical models that generate only qualitative predictions of economic change. Using the foreign exchange market as a testing ground for IKE, this book sheds new light on exchange-rate and risk-premium movements, which have confounded conventional models for decades. Offering a fresh way to think about markets and representing a potential turning point in economics, Imperfect Knowledge Economics will be essential reading for economists, policymakers, and professional investors.
Book Synopsis Foreign Exchange Risk Premium by : Mr.Lorenzo Giorgianni
Download or read book Foreign Exchange Risk Premium written by Mr.Lorenzo Giorgianni and published by International Monetary Fund. This book was released on 1997-04-01 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper challenges the conventional view that foreign exchange risk premiums are small, not volatile, and unrelated to macroeconomic variables. For the Italian lira (1987-94), unconditional risk premiums—constructed using survey data to measure exchange rate expectations—are found to be sizable (relative to the dimension of the forward premium), highly volatile (relative to the variability of the forward bias), and predictable. Estimation of structural models of the risk premium suggests that anticipated fiscal contractions in Italy and lower uncertainty about the future path of fiscal policy are associated with a lower risk premium on lira-denominated assets.
Book Synopsis Financial Markets and the Real Economy by : John H. Cochrane
Download or read book Financial Markets and the Real Economy written by John H. Cochrane and published by Now Publishers Inc. This book was released on 2005 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial Markets and the Real Economy reviews the current academic literature on the macroeconomics of finance.
Book Synopsis Determinants of the Foreign Exchange Risk Premium in Gulf Cooperation Council Countries by : Mr.Tigran Poghosyan
Download or read book Determinants of the Foreign Exchange Risk Premium in Gulf Cooperation Council Countries written by Mr.Tigran Poghosyan and published by International Monetary Fund. This book was released on 2010-11-01 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes macroeconomic determinants of the foreign exchange risk premium in two Gulf Cooperation Council (GCC) countries that peg their currencies to the U.S. dollar: Saudi Arabia and the United Arab Emirates. The analysis is based on the stochastic discount factor methodology, which imposes a no arbitrage condition on the relationship between the foreign exchange risk premium and its macroeconomic determinants. Estimation results suggest that U.S. inflation and consumption growth are important factors driving the risk premium, which is in line with the standard C-CAPM model. In addition, growth in international oil prices influences the risk premium, reflecting the important role played by the hydrocarbon sector in GCC economies. The methodology employed in this paper can be used for forecasting the risk premium on a monthly basis, which has important practical implications for policymakers interested in the timely monitoring of risks in the GCC.
Book Synopsis Exchange Rate Theory and Practice by : John F. Bilson
Download or read book Exchange Rate Theory and Practice written by John F. Bilson and published by University of Chicago Press. This book was released on 2007-12-01 with total page 542 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume grew out of a National Bureau of Economic Research conference on exchange rates held in Bellagio, Italy, in 1982. In it, the world's most respected international monetary economists discuss three significant new views on the economics of exchange rates - Rudiger Dornbusch's overshooting model, Jacob Frenkel's and Michael Mussa's asset market variants, and Pentti Kouri's current account/portfolio approach. Their papers test these views with evidence from empirical studies and analyze a number of exchange rate policies in use today, including those of the European Monetary System.
Book Synopsis The Monetary Approach to the Balance of Payments by : Jacob Frenkel
Download or read book The Monetary Approach to the Balance of Payments written by Jacob Frenkel and published by Routledge. This book was released on 2013-07-18 with total page 389 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book collects together the basic documents of an approach to the theory and policy of the balance of payments developed in the 1970s. The approach marked a return to the historical traditions of international monetary theory after some thirty years of departure from them – a departure occasioned by the international collapse of the 1930s, the Keynesian Revolution and a long period of war and post-war reconstruction in which the international monetary system was fragmented by exchange controls, currency inconvertibility and controls over international trade and capital movements.
Book Synopsis Approximate Equilibrium Asset Prices by : Fernando Restoy Lozano
Download or read book Approximate Equilibrium Asset Prices written by Fernando Restoy Lozano and published by . This book was released on 1995 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: En este trabajo se considera su modelo de valoracion, donde las primas de riesgo se explican por covarianzas con el rendimiento de la cartera agregada de la economia (riqueza) y con el consumo. Argumentando que la riqueza es, esencialmente, no observable, se utiliza la funcion de consumo para eliminar la tasa de rendimiento agregada de las ecuaciones de valoracion. Asi, se obtiene que los rendimientos son determinados, en equilibrio, segun una ecuacion que constituye una version generalizada del CAPM con consumo. Esta expresion es derivada para procesos homocedasticos y heterocedasticos, y se utiliza para obtener, en equilibrio, la estructura temporal de los tipos de interes. (frl) (igg).
Book Synopsis Covered Interest Parity Deviations: Macrofinancial Determinants by : Mr.Eugenio M Cerutti
Download or read book Covered Interest Parity Deviations: Macrofinancial Determinants written by Mr.Eugenio M Cerutti and published by International Monetary Fund. This book was released on 2019-01-16 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: For about three decades until the Global Financial Crisis (GFC), Covered Interest Parity (CIP) appeared to hold quite closely—even as a broad macroeconomic relationship applying to daily or weekly data. Not only have CIP deviations significantly increased since the GFC, but potential macrofinancial drivers of the variation in CIP deviations have also become significant. The variation in CIP deviations seems to be associated with multiple factors, not only regulatory changes. Most of these do not display a uniform importance across currency pairs and time, and some are associated with possible temporary considerations (such as asynchronous monetary policy cycles).
Book Synopsis Foreign Exchange Intervention Rules for Central Banks: A Risk-based Framework by : Romain Lafarguette
Download or read book Foreign Exchange Intervention Rules for Central Banks: A Risk-based Framework written by Romain Lafarguette and published by International Monetary Fund. This book was released on 2021-02-12 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a rule for foreign exchange interventions (FXI), designed to preserve financial stability in floating exchange rate arrangements. The FXI rule addresses a market failure: the absence of hedging solution for tail exchange rate risk in the market (i.e. high volatility). Market impairment or overshoot of exchange rate between two equilibria could generate high volatility and threaten financial stability due to unhedged exposure to exchange rate risk in the economy. The rule uses the concept of Value at Risk (VaR) to define FXI triggers. While it provides to the market a hedge against tail risk, the rule allows the exchange rate to smoothly adjust to new equilibria. In addition, the rule is budget neutral over the medium term, encourages a prudent risk management in the market, and is more resilient to speculative attacks than other rules, such as fixed-volatility rules. The empirical methodology is backtested on Banco Mexico’s FXIs data between 2008 and 2016.
Book Synopsis The Economics of Exchange Rates by : Lucio Sarno
Download or read book The Economics of Exchange Rates written by Lucio Sarno and published by Cambridge University Press. This book was released on 2003-01-09 with total page 334 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the last few decades exchange rate economics has seen a number of developments, with substantial contributions to both the theory and empirics of exchange rate determination. Important developments in econometrics and the increasingly large availability of high-quality data have also been responsible for stimulating the large amount of empirical work on exchange rates in this period. Nonetheless, while our understanding of exchange rates has significantly improved, a number of challenges and open questions remain in the exchange rate debate, enhanced by events including the launch of the Euro and the large number of recent currency crises. This volume provides a selective coverage of the literature on exchange rates, focusing on developments from within the last fifteen years. Clear explanations of theories are offered, alongside an appraisal of the literature and suggestions for further research and analysis.
Book Synopsis Asset Pricing Lessons for Modeling Business Cycles by : Michele Boldrin
Download or read book Asset Pricing Lessons for Modeling Business Cycles written by Michele Boldrin and published by . This book was released on 1996 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a model which accounts for the observed equity premium and average risk free rate, without implying counterfactually high risk aversion. The model also does well in accounting for business cycle phenomena. With respect to the conventional measures of business cycle volatility and comovement with output, the model does roughly as well as the standard business cycle model. On two other dimensions, the model's business cycle implications are actually improved. Its enhanced internal propagation allows it to account for the fact that there is positive persistence in output growth, and the model also provides a resolution to the 'excess sensitivity puzzle' for consumption and income. Key features of the model are habit persistence preferences, and a multisector technology with limited intersectoral mobility of factors of production.
Book Synopsis A Fiscal Theory of the Currency Risk Premium and of Sterilized Intervention by : Michael Kumhof
Download or read book A Fiscal Theory of the Currency Risk Premium and of Sterilized Intervention written by Michael Kumhof and published by International Monetary Fund. This book was released on 2002-02 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a dynamic stochastic general equilibrium monetary portfolio choice model that accomplishes two objectives. First, it provides a theory of currency risk premia based on a weak and plausible form of fiscal nonneutrality. Domestic and foreign bonds become imperfect substitutes, the uncovered interest parity condition is replaced with a portfolio balance equation, and the central bank can separately choose the growth rate of its nominal anchor and the domestic bond interest rate. Second, it can turn be shown that, and how, sterilized intervention affects equilibrium allocations and prices.
Book Synopsis Exchange Rate Economics by : Ronald MacDonald
Download or read book Exchange Rate Economics written by Ronald MacDonald and published by Routledge. This book was released on 2005 with total page 334 pages. Available in PDF, EPUB and Kindle. Book excerpt: ''In summary, the book is valuable as a textbook both at the advanced undergraduate level and at the graduate level. It is also very useful for the economist who wants to be brought up-to-date on theoretical and empirical research on exchange rate behaviour.'' ""Journal of International Economics""
Book Synopsis NBER Macroeconomics Annual 2007 by : Daron Acemoglu
Download or read book NBER Macroeconomics Annual 2007 written by Daron Acemoglu and published by . This book was released on 2008-03 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The NBER Macroeconomics Annual provides a forum for important debates in contemporary macroeconomics and major developments in the theory of macroeconomic analysis and policy that include leading economists from a variety of fields. The papers and accompanying discussions in NBER Macroeconomics Annual 2007 address exchange-rate models; implications of credit market frictions; cyclical budgetary policy and economic growth; the impacts of shocks to government spending on consumption, real wages, and employment; dynamic macroeconomic models; and the role of cyclical entry of new firms and products on the nature of business-cycle fluctuations and on the effects of monetary policy.
Book Synopsis The Economics of Exchange Rates (Collected Works of Harry Johnson) by : Jacob A. Frenkel
Download or read book The Economics of Exchange Rates (Collected Works of Harry Johnson) written by Jacob A. Frenkel and published by Routledge. This book was released on 2013-07-18 with total page 252 pages. Available in PDF, EPUB and Kindle. Book excerpt: The studies in this book deal with the determination of foreign exchange rates and the characteristics of the foreign exchange market. Analysis is made of flexible exchange rates through an approach developed by the authors, called the ‘asset-market approach’. Theory is combined with practical application in a clear concise way that will be understood by readers with a basic understanding of economics.
Book Synopsis International Finance and Financial Crises by : Mr.Peter Isard
Download or read book International Finance and Financial Crises written by Mr.Peter Isard and published by International Monetary Fund. This book was released on 2000-01-24 with total page 304 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book contains the proceedings of a conference held in honor of Robert P. Flood Jr. Contributors to the conference were invited to address many of the topics that Robert Flood has explored including regime switching, speculative attacks, bubbles, stock market voloatility, macro models with nominal rigidities, dual exchange rates, target zones, and rules versus discretion in monetary policy. The results, contained in this volume, include five papers on topics in international finance.
Book Synopsis Handbook of International Economics by : G.M. Grossman
Download or read book Handbook of International Economics written by G.M. Grossman and published by Elsevier. This book was released on 1997-10-24 with total page 896 pages. Available in PDF, EPUB and Kindle. Book excerpt: Handbook of International Economics
