The Forward Exchange Rate and Macroeconomics
نویسنده
چکیده
This paper discusses the conditions under which a risk premium is incorporated in the forward exchange rate. A new condition for the existence of a risk premium is proposed. We show that earlier models of the risk premium, which emphasize either the role of net foreign investment or of the relative supplies of ‘outside* assets, are not suited for assessing the effects of changes in macroeconomic policy.
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