NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Econometric Analysis of Present Value Models When the Discount Factor Is near One

Kenneth D. West

NBER Working Paper No. 18247
Issued in July 2012
NBER Program(s):   AP   IFM   TWP

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.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: West, Kenneth D., 2012. "Econometric analysis of present value models when the discount factor is near one," Journal of Econometrics, Elsevier, vol. 171(1), pages 86-97.

Users who downloaded this paper also downloaded these:
Ortega and Peri w18193 The Effect of Trade and Migration on Income
Vayanos and Wang w18251 Market Liquidity — Theory and Empirical Evidence
Bloom, Floetotto, Jaimovich, Saporta Eksten, and Terry w18245 Really Uncertain Business Cycles
Delgado, Ketels, Porter, and Stern w18249 The Determinants of National Competitiveness
Engel, Mark, and West w18382 Factor Model Forecasts of Exchange Rates
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us