Net foreign asset positions and appreciation expectations on the Swiss franc and the Japanese Yen
Sophia Latsos () and
Gunther Schnabl ()
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Sophia Latsos: Universität Leipzig
International Economics and Economic Policy, 2018, vol. 15, issue 2, No 2, 280 pages
Abstract The paper shows that currencies of countries with persistent current account surpluses and high foreign-currency denominated assets, such as the Swiss franc and the Japanese yen, are under persistent appreciation pressure, particularly when the centres of the world monetary system follow expansionary monetary policies. This limits the choice of exchange rate regime. Given flexible exchange rates, a negative risk premium on the domestic interest rate can emerge. Empirical estimations provide mixed evidence for a negative impact of net foreign asset positions and exchange rate uncertainty on interest rates of international creditor countries at the periphery of the world monetary system.
Keywords: Swiss franc; Japanese yen; Exchange rate risk; Negative risk premium; Self-fulfilling expectations; Appreciation pressure (search for similar items in EconPapers)
JEL-codes: F15 F31 F33 (search for similar items in EconPapers)
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