Fixes: Of The Forward Discount Puzzle

Robert Flood () and Andrew Rose

No 4928, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Regressions of ex post changes in floating exchange rates on appropriate interest differentials typically imply that the high- interest rate currency tends to appreciate, the `forward discount puzzle.' Using data from the European Monetary System, we find that a large part of the forward discount puzzle vanishes for regimes of fixed exchange rates. That is, deviations from uncovered interest parity appear to vary in a way which is dependent upon the exchange rate regime. By using the many EMS realignments, we are also able to quantify the `peso problem.'

JEL-codes: F31 (search for similar items in EconPapers)
Date: 1994-11
Note: IFM
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Citations: View citations in EconPapers (12)

Published as Review of Economics and Statistics (1996).

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Related works:
Journal Article: Fixes: Of the Forward Discount Puzzle (1996)
Working Paper: Fixes: Of the Forward Discount Puzzle (1994)
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