NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Fixes: Of The Forward Discount Puzzle

Robert P. Flood, Andrew K. Rose

NBER Working Paper No. 4928
Issued in November 1994
NBER Program(s):   IFM

Regressions of ex post changes in floating exchange rates on appropriate interest differentials typically imply that the high- interest rate currency tends to appreciate, the `forward discount puzzle.' Using data from the European Monetary System, we find that a large part of the forward discount puzzle vanishes for regimes of fixed exchange rates. That is, deviations from uncovered interest parity appear to vary in a way which is dependent upon the exchange rate regime. By using the many EMS realignments, we are also able to quantify the `peso problem.'

download in pdf format
   (137 K)

email paper

This paper is available as PDF (137 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: Review of Economics and Statistics (1996).

Users who downloaded this paper also downloaded these:
McCallum w4113 A Reconsideration of the Uncovered Interest Parity Relationship
Burnside, Eichenbaum, and Rebelo w13278 Understanding the Forward Premium Puzzle: A Microstructure Approach
Meredith and Chinn w6797 Long-Horizon Uncovered Interest Rate Parity
Lewis w4951 Puzzles in International Financial Markets
Frankel and Poonawala w12496 The Forward Market in Emerging Currencies: Less Biased Than in Major Currencies
 
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