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The Forward Premium Puzzle in a Two-Country World / Ian Martin.
- Format:
- Book
- Author/Creator:
- Martin, Ian.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w17564.
- NBER working paper series no. w17564
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2011.
- Summary:
- I explore the behavior of asset prices and the exchange rate in a two-country world. When the large country has bad news, the relative price of the small country's output declines. As a result, the small country's bonds are risky, and uncovered interest parity fails, with positive excess returns available to investors who borrow at the large country's interest rate and lend at the small country's interest rate. I use a diagrammatic approach to derive these and other results in a calibration-free way.
- Notes:
- Print version record
- November 2011.
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