TY  - JOUR
AU  - Flood,Robert P.
AU  - Rose,Andrew K.
TI  - Fixes: Of The Forward Discount Puzzle
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4928
PY  - 1994
Y2  - November 1994
UR  - http://www.nber.org/papers/w4928
L1  - http://www.nber.org/papers/w4928.pdf
N1  - Author contact info:
Robert Flood
Notre Dame
E-Mail: rflood1@nd.edu

Andrew K. Rose
Haas School of Business Administration
University of California, Berkeley
Berkeley, CA 94720-1900
Tel: 510/642-6609
Fax: 510/642-4700
E-Mail: arose@haas.berkeley.edu
AB  - 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.'
ER  -