Bond risk premia, macroeconomic fundamentals and the exchange rate

Marcello Pericoli and Marco Taboga

International Review of Economics & Finance, 2012, vol. 22, issue 1, 42-65

Abstract: We propose a two-country no-arbitrage term-structure model to analyze the joint dynamics of bond yields, macroeconomic variables and the exchange rate. The model allows to understand how exogenous shocks to the exchange rate affect the yield curves, how bond yields co-move in different countries and how the exchange rate is influenced by interest rates, macro-economic variables and time-varying bond risk premia.

Keywords: Yield curve; Exchange rate; Bond risk premia; UIP (search for similar items in EconPapers)
JEL-codes: C5 F3 G1 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (18)

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Related works:
Working Paper: Bond risk premia, macroeconomic fundamentals and the exchange rate (2009)
Working Paper: Bond risk premia, macroeconomic fundamentals and the exchange rate (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:22:y:2012:i:1:p:42-65

DOI: 10.1016/j.iref.2011.08.008

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