Official Interventions and Occasional Violations of Uncovered Interest Party in the Dollar-DM Market / Nelson Mark, Young-Kyu Moh.

By:

Mark, Nelson

Contributor(s):

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w9948.Publication details: Cambridge, Mass. National Bureau of Economic Research 2003.Description: 1 online resource: illustrations (black and white)Subject(s):

F3 - International Finance

Online resources:

Available additional physical forms:

Hardcopy version available to institutional subscribers

Abstract: This paper presents a model of exchange rate determination in which the forward premium anomaly emerges as the result of unanticipated central bank interventions in the foreign exchange market. Deviations from uncovered interest parity (UIP) therefore represent neither unexploited profit opportunities nor compensation for bearing risk. In simulations, the model generates a forward premium anomaly and matches several other notable features of US-German data. Additional empirical support is obtained from an analysis of Fed and Bundesbank interventions in the dollar--DM market where it is found that the forward premium anomaly intensifies during those times when a central bank intervenes.

Tags from this library: No tags from this library for this title. Log in to add tags.

Average rating: 0.0 (0 votes)

Holdings
Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w9948 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

Collection: Colección NBER Close shelf browser (Hides shelf browser)

Previous	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	No cover image available	Next
Previous	nber w9945 Incomplete Contracts and the Product Cycle /	nber w9946 Partial Adjustment without Apology /	nber w9947 Trade Policy and Industrial Sector Responses: Using Evolutionary Models to Interpret the Evidence /	nber w9948 Official Interventions and Occasional Violations of Uncovered Interest Party in the Dollar-DM Market /	nber w9949 Propping and Tunneling /	nber w9950 Gone But Not Forgotten: Labor Flows, Knowledge Spillovers, and Enduring Social Capital /	nber w9951 Capital Investments and Stock Returns /	Next

September 2003.

This paper presents a model of exchange rate determination in which the forward premium anomaly emerges as the result of unanticipated central bank interventions in the foreign exchange market. Deviations from uncovered interest parity (UIP) therefore represent neither unexploited profit opportunities nor compensation for bearing risk. In simulations, the model generates a forward premium anomaly and matches several other notable features of US-German data. Additional empirical support is obtained from an analysis of Fed and Bundesbank interventions in the dollar--DM market where it is found that the forward premium anomaly intensifies during those times when a central bank intervenes.