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dc.contributorVirginia Tech
dc.contributor.authorChen, Yu-Chin
dc.contributor.authorTsang, Kwok Ping
dc.date.accessioned2014-02-21T14:20:15Z
dc.date.available2014-02-21T14:20:15Z
dc.date.issued2013-03
dc.identifier.citationChen, Yu-Chin; Tsang, Kwok Ping. "What does the yield curve tell us about exchange rate predictability?" Rev. Econ. Stat., 95 (1) (2013), pp. 185-205 doi:10.1162/REST_a_00231
dc.identifier.issn0034-6535
dc.identifier.urihttp://hdl.handle.net/10919/25507
dc.description.abstractSince the term structure of interest rates embodies information about future economic activity, we extract relative Nelson-Siegel (1987) factors from cross-country yield curve differences to proxy expected movements in future exchange rate fundamentals. Using monthly data for the United Kingdom, Canada, Japan, and the United States, we show that the yield curve factors predict exchange rate movements and explain excess currency returns one month to two years ahead. Our results provide support for the asset pricing formulation of exchange rate determination and offer an intuitive explanation to the uncovered interest parity puzzle by relating currency risk premiums to inflation and business cycle risks.
dc.language.isoen_US
dc.publisherMIT Press
dc.subjectterm structure models
dc.subjectinterest-rate parity
dc.subjectmonetary-policy
dc.subjectexpectations
dc.subjectinflation
dc.subjectmacroeconomics
dc.subjectfundamentals
dc.subjectregressions
dc.subjectdynamics
dc.subjectpuzzles
dc.titleWhat does the yield curve tell us about exchange rate predictability?
dc.typeArticle
dc.identifier.urlhttp://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00231
dc.date.accessed2014-02-05
dc.title.serialReview of Economics and Statistics
dc.identifier.doihttps://doi.org/10.1162/REST_a_00231


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