Fixes: Of The Forward Discount Puzzle / Robert P. Flood, Andrew K. Rose.

Format:

Book

Author/Creator:

Flood, Robert P.

Contributor:

National Bureau of Economic Research.

Rose, Andrew K.

Series:

Working Paper Series (National Bureau of Economic Research) no. w4928.

NBER working paper series no. w4928

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Fixes

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1994.

Summary:

Regressions of ex post changes in floating exchange rates on appropriate interest differentials typically imply that the high- interest rate currency tends to appreciate, the `forward discount puzzle.' Using data from the European Monetary System, we find that a large part of the forward discount puzzle vanishes for regimes of fixed exchange rates. That is, deviations from uncovered interest parity appear to vary in a way which is dependent upon the exchange rate regime. By using the many EMS realignments, we are also able to quantify the `peso problem.'

Notes:

Print version record

November 1994.