Econometric Analysis of Present Value Models When the Discount Factor Is near One / Kenneth D. West.

Format:

Book

Author/Creator:

West, Kenneth D.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18247.

NBER working paper series no. w18247

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

This paper develops asymptotic econometric theory to help understand data generated by a present value model with a discount factor near one. A leading application is to exchange rate models. A key assumption of the asymptotic theory is that the discount factor approaches 1 as the sample size grows. The finite sample approximation implied by the asymptotic theory is quantitatively congruent with modest departures from random walk behavior with imprecise estimation of a well-studied regression relating spot and forward exchange rates.

Notes:

Print version record

July 2012.