A Quantity-Driven Theory of Term Premia and Exchange Rates
We develop a model in which specialized bond investors must absorb shocks to the supply and demand for long-term bonds in two currencies. Since long-term bonds and foreign exchange are both exposed to unexpected movements in short-term interest rates, a shift in the supply of long-term bonds in one currency influences the foreign exchange rate between the two currencies, as well as bond term premia in both currencies. Our model matches several important empirical patterns, including the co-movement between exchange rates and term premia, as well as the finding that central banks' quantitative easing policies impact exchange rates. An extension of our model sheds light on the persistent deviations from covered interest rate parity that have emerged since 2008.
We are grateful to John Campbell, Wenxin Du, Ken Froot, Arvind Krishnamurthy, Gordon Liao, Hanno Lustig, and Matteo Maggiori and seminar participants at Dartmouth Tuck, the ECB, Harvard, the NBER Asset Pricing Summer Institute, Oxford Said, SITE 2019, Wharton, and Warwick Business School for helpful comments. Greenwood, Hanson, and Sunderam gratefully acknowledge funding from the Harvard Business School Division of Research. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
This document contains a list of professional activities beyond my main employment at Harvard University. Please feel free to contact me with any questions about this disclosure statement.
Outside activities since 2008, paid and unpaid:
Academic Advisory Board, Martingale Asset Management (chairman) Consultant, Martingale Asset Management
AllianceBernstein, research presentation and consultation Capital structure consultation to two non-financial companies Associate Editor, Review of Financial Studies (unpaid) Editor, Review of Financial Studies (2014-present, unpaid)
In 2014, the Brookings Institute paid me an honorarium for the working paper “Government Debt Management at the
Zero Lower Bound”
The Banco Central de Chile paid me an honorarium for the paper “Forward Guidance in the Yield Curve: Short Rates versus Bond Supply.”
No institution had any say on the content of these papers or on what I write.
Paid speeches and executive education:
HBS Investment Management Workshop (various years, since 2008) HBS Finance for Senior Executives (various years, unpaid before 2016) SanfordBernstein Research Conference
Robeco Q-Group Arrowstreet Capital Pyramis
Windham Capital Management
Since September 2015, I have been a voting member on the Harvard University Committee on pensions. I do not do consulting work or make paid presentations to any investment managers employed or being considered by Harvard in this capacity.
As part of my work at Harvard Business School, I regularly write cases about hedge funds, investment managers, and their strategies. I receive no compensation from these managers for writing these cases, and the cases are not meant as endorsements of the managers or their strategies. I receive royalties (currently under $1500 per year) for cases I have written while employed at Harvard.Jeremy C. Stein
Jeremy C. Stein
Outside (Non-Harvard) Activities Since 2006
A. Compensated Activities*
I have given paid talks for a number of financial firms, investor groups, academic institutions, and central banks.
Key Square Capital Management: consultant, July 2016-December 2019.
BlueMountain Capital Management: consultant, 2015.
Guggenheim Partners: consultant, 2005-2007.
The Clearing House Association: “An Analysis of the Impact of ‘Substantially Heightened’ Capital Requirements on Large Financial Institutions,” unpublished paper with Anil Kashyap and Samuel Hanson, 2010.
Honoraria for Papers
Federal Reserve Bank of Kansas City, for “Rethinking Capital Regulation,” with Anil Kashyap and Raghuram Rajan, 2008.
Federal Reserve Bank of Kansas City, for “The Federal Reserve’s Balance Sheet as a Financial Stability Tool,” with Robin Greenwood and Sam Hanson, 2016.
Brookings Institution, for “Strengthening and Streamlining Bank Capital Regulation,” with Robin Greenwood, Sam Hanson and Adi Sunderam, 2017.
Federal Reserve Board: Governor, May 2012-May 2014.
U.S. Treasury Department: Senior Advisor to the Secretary and concurrently, staff of National Economic Council, February-July 2009.
Quarterly Journal of Economics: co-editor, 2011-2012.
Journal of Economic Perspectives: co-editor, 2007-2008.
Study Center, Gerzensee, Switzerland: summer-school course, 2011.
Northwestern University: visiting scholar, 2009.
B. Significant Non-Compensated Activities
Harvard Management Company: Board of Directors, 2015-present.
American Finance Association: President, 2008 President-Elect, 2007 Vice-President, 2006 Board of Directors, 2009-2011.
Financial Advisory Roundtable, Federal Reserve Bank of New York, 2006-2012, 2019-present
Squam Lake Group, 2008-2012.
*Excludes honoraria from non-profit institutions, government agencies, and academic journals of $3,000 or less in a given year, and payments from for-profit firms of $500 or less in a given year.