The Real Exchange Rate, Real Interest Rates, and the Risk Premium

Charles Engel

NBER Working Paper No. 17116
Issued in June 2011

---- Acknowledgements -----

I thank Bruce Hansen and Ken West for many useful conversations and Mian Zhu for super research assistance. I thank David Backus, Gianluca Benigno, Cosmin Ilut, Keyu Jin, Richard Meese, Michael Melvin, Anna Pavlova, John Prins, Alan Taylor, and Adrien Verdelhan for comments on an earlier draft of the paper. I have benefited from support from the following organizations at which I was a visiting scholar: Federal Reserve Bank of Dallas, Federal Reserve Bank of St. Louis, Federal Reserve Board, European Central Bank, Hong Kong Institute for Monetary Research, Central Bank of Chile, and CREI. I acknowledge support from the National Science Foundation grant no. 0451671. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.

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