Interpreting the Forward Premium Anomaly

David Backus, Silverio Foresi and Chris Telmer ()

Canadian Journal of Economics, 1995, vol. 28, issue s1, 108-119

Abstract: One of the central issues in international finance concerns the forward premium anomaly: changes in spot exchange rates are inversely related to the premium of forward rates over spot rates. The authors construct a numerical example of a theoretical economy with this property and discuss its potential as an explanation of the anomaly.

Date: 1995
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