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Understanding the Forward Premium Puzzle: A Microstructure Approach / Craig Burnside, Martin S. Eichenbaum, Sergio Rebelo.
- Format:
- Book
- Author/Creator:
- Burnside, Craig.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w13278.
- NBER working paper series no. w13278
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Understanding the Forward Premium Puzzle
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2007.
- Summary:
- High-interest-rate currencies tend to appreciate relative to low-interest-rate currencies. We argue that adverse-selection problems between participants in foreign exchange markets can account for this 'forward premium puzzle.' The key feature of our model is that the adverse selection problem facing market makers is worse when, based on public information, a currency is expected to appreciate.
- Notes:
- Print version record
- July 2007.
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