EconPapers    
Economics at your fingertips  
 

The forward premium puzzle and the euro

Jun Nagayasu

No 1317, Working Papers from University of Strathclyde Business School, Department of Economics

Abstract: This paper evaluates the forward premium puzzle using the Euro exchange rate. Unlike previous studies, our analysis utilizes time-varying parameter methods and is based on two approaches for evaluation of the puzzle; the traditional approach analyzing the sensitivity of interest rate differentials to the forward premium, and the other looking into deviations from the covered interest rate parity (CIRP) condition. Then we provide evidence that the forward premium puzzle indeed became more prominent around the time of the recent crisis periods such as the Lehman Shock and the Euro crisis. This is also shown to be consistent with a deterioration in the CIRP.

Keywords: forward premium puzzle; risk premium; time varying parameters; financial crises (search for similar items in EconPapers)
JEL-codes: F31 F36 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2013-08
New Economics Papers: this item is included in nep-eec, nep-mon and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published

Downloads: (external link)
http://www.strath.ac.uk/media/1newwebsite/departme ... /2013/13-17FINAL.pdf (application/pdf)

Related works:
Journal Article: The forward premium puzzle and the Euro (2014) Downloads
Working Paper: The Forward Premium Puzzle and The Euro (2013) Downloads
Working Paper: The Forward Premium Puzzle And The Euro (2013) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:str:wpaper:1317

Access Statistics for this paper

More papers in Working Papers from University of Strathclyde Business School, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Kirsty Hall ().

 
Page updated 2024-05-27
Handle: RePEc:str:wpaper:1317