IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v10y1997i2p369-403.html
   My bibliography  Save this article

An Exploration of the Forward Premium Puzzle in Currency Markets

Author

Listed:
  • Bansal, Ravi

Abstract

A standard empirical finding is that expected changes in exchange rates and interest rate differentials across countries are negatively related, implying that uncovered interest rate parity is violated in the data. This article provides new empirical evidence that suggests that violations of uncovered interest rate parity, and its economic implications, depend on the sign of the interest rate differentially. A framework related to term structure models is developed to account for the puzzling relationship between expected changes in exchange rates and interest rate differentials. Estimation results suggest that a particular term structure model can account for the puzzling empirical evidence. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Suggested Citation

  • Bansal, Ravi, 1997. "An Exploration of the Forward Premium Puzzle in Currency Markets," The Review of Financial Studies, Society for Financial Studies, vol. 10(2), pages 369-403.
    • Handle: RePEc:oup:rfinst:v:10:y:1997:i:2:p:369-403
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:10:y:1997:i:2:p:369-403. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sfsssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.