This paper proposes a di¤erent empirical approach to estimate the UIP by analyzing a large number of cross-country bilateral exchange rates using cross-section analysis. Di¤erent from conventional time-series UIP, cross-sectional UIP is examined with single equation estimation and panel regression model estimation. The exchange rates analyzed here include a broad spectrum of countries: develope...

We employ a multivariate BEKK GARCH model which allows news to affect conditional volatility in an asymmetric manner. The asymmetric model outperforms the standard symmetric model, implying that efficient financial decision makers should not treat good and bad news as homogenous. We estimate the conditional variance and covariance of the Japanese yen, Swiss franc and British pound vis-à-vis the...

This paper concentrates on stability properties of heterogeneous agent models which include trend traders. So far, papers have only described the models’ behaviour in the very long run. I propose an explanation for the phenomenon that computer simulations of these models regularly converge if certain parameter constellations are used. In particular, insights of physics concerning time-delayed f...

Although the real exchange rate real interest rate (RERI) relationship is central to most open economy macroeconomic models, empirical support for the relationship is generally found to be rather weak. In this paper we re-investigate the RERI relationship using bilateral U.S. real exchange rate data spanning the period 1978 to 2007. Instead of testing one particular model, we build on Campbell ...

We use a dynamic factor model to provide a semi-structural representation for 101 quarterly US macroeconomic series. We find that (i) the US economy is well described by a number of structural shocks between two and six. Focusing on the four-shock specification, we identify, using sign restrictions, two non-policy shocks, demand and supply, and two policy shocks, monetary and fiscal. We obtain ...