Risk Appetite and Exchange Rates

Nonlinearity In Exchange Rates and Forecasting

Exchange Rates Dynamics with Long-Run Risk and Recursive Preferences

Standard macro models cannot explain why real exchange rates are volatile and disconnected from macro aggregates. Recent research argues that models with persistent growth rate shocks and recursive preferences can solve that puzzle. I show that this result is highly sensitive to the structure of financial markets. When just a bond is traded internationally, then long-run risk generates insuffic...

Exchange rates.

THE UNIVERSITY of Pennsylvania health system was in London recently, recruiting nurses. Its advertisement stated that its recruiters were experienced in hiring nurses from the UK, Ireland and the Philippines, and an 'on the spot job offer is a possibility'. This one advert neatly captures the dynamics of the new international nursing labour market. The advert was placed by an international recr...

Can currency-based risk factors help forecast exchange rates?

This paper examines the time series predictability of bilateral exchange rates from linear factormodels that utilize the unconditional and conditional expectations of three currencybased risk factors. Exploiting a comprehensive set of statistical criteria, we find that all versions of the linear factor models largely fail to outperform the benchmark random walk with drift model for the out-of-s...

On exchange rates and efficiency*

This paper analyzes an exchange economy in which several assets serve as stores of value and where agents have completely heterogeneous preferences and endowments. It describes the set of perfect foresight equilibria in which all assets have positive prices. There are international policies with determinate exchange rates if the world economy satisfies a strong efficiency criterion. Also, the c...