On the Foreign Exchange Risk Premium in Sticky-Price General Equilibrium Models

Charles Engel

International Tax and Public Finance, 1999, vol. 6, issue 4, 505 pages

Abstract: The properties of the foreign exchange risk premium in general equilibrium models with sticky nominal pricesare examined. In these models, risk premiums arise endogenously because monetary shocks lead to covariationof consumption and exchange rates. In some cases, the risk premiums are much larger than those produced inneoclassical general equilibrium models. Copyright Kluwer Academic Publishers 1999

Keywords: foreign exchange risk premium; interest parity; sticky prices (search for similar items in EconPapers)
Date: 1999
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DOI: 10.1023/A:1008745213982

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