Determinants of carry trades in Central and Eastern Europe

Andreas Hoffmann

No 102, Working Papers from University of Leipzig, Faculty of Economics and Management Science

Abstract: In this paper, I analyze determinants of carry trade returns in Central and Eastern Europe (CEE). I show that carry trades to CEE were lucrative due to interest rate spreads between the funding and investment currency from 2004 to 2006. They became unprofitable when liquidity risk and exchange rate volatility increased after 2007. The analysis suggests that the exchange rate regime of the CEE economy matters for carry trade returns. Overall, exchange rate stabilization, particularly via managed floats, seems to allow for the highest profit opportunities.

Keywords: carry trades; emerging markets; exchange rates (search for similar items in EconPapers)
JEL-codes: E32 E44 F31 G11 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Determinants of carry trades in Central and Eastern Europe (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:leiwps:102

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