An Intermediation-Based Model of Exchange Rates

Semyon Malamud and Andreas Schrimpf

No 13182, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We develop a general equilibrium model with intermediaries at the heart of international financial markets. In our model, intermediaries bargain with their customers and extract rents for providing access to foreign claims. The behavior of intermediaries, by tilting state prices, generates an explicit, non-linear risk structure in exchange rates. We show how this endogenous risk structure helps explain a number of anomalies in foreign exchange and international capital markets, including the safe haven properties of exchange rates and the breakdown of covered interest parity.

Keywords: Financial intermediation; Exchange rates; Safe haven; Covered interest parity deviations (search for similar items in EconPapers)
JEL-codes: E44 E52 F31 F33 G13 G15 G23 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://cepr.org/publications/DP13182 (application/pdf)

Related works:
Journal Article: An Intermediation-Based Model of Exchange Rates (2025)
Working Paper: An Intermediation-Based Model of Exchange Rates (2024)
Working Paper: An intermediation-based model of exchange rates (2018)
Working Paper: An Intermediation-Based Model of Exchange Rates (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13182

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP13182

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().