Exchange Rate Expectations and the Risk Premium: Tests For a Cross- Section of 17 Currencies

Jeffrey Frankel and Menzie Chinn

No 3806, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Survey data on a broad cross section of 17 currencies are used to determine whether the forward discount moves primarily in response to changes in expectations of depreciation, or in the risk premium. We find that changes in expected depreciation are quantitatively significant. However we also find evidence, in contrast to earlier studies involving only four or five major currencies, that variation in the risk premium constitutes a large part of variation in the forward discount as well.

Date: 1991-08
Note: ITI IFM
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Published as Review of International Economics, 1: no. 2, June 1993, 136-144

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Journal Article: Exchange Rate Expectations and the Risk Premium: Tests for a Cross Section of 17 Currencies (1993)
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