The Forward Premium Puzzle and the Euro

Nagayasu, Jun (2013) The Forward Premium Puzzle and the Euro. Discussion paper. University of Strathclyde, Glasgow.

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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 di§erentials 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.

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• Item metadata

  Item type:	Monograph(Discussion paper)
  ID code:	68097
  Dates:	Date Event 2013 Published
  Notes:	Published as a paper within the Discussion Papers in Economics, No. 13-17 (2013)
  Subjects:	Social Sciences > Economic Theory Social Sciences > Finance
  Department:	Strathclyde Business School > Economics
  Depositing user:	Pure Administrator
  Date deposited:	29 May 2019 10:40
  Last modified:	09 Apr 2024 04:43
  URI:	https://strathprints.strath.ac.uk/id/eprint/68097