International Business School
Waltham, MA 02454-9110
Institutional Affiliation: Brandeis University
Information about this author at RePEc
NBER Working Papers and Publications
|August 1989||Interest Rate Term Premiums and the Failure of the Speculative Efficiency Hypothesis: A Theoretical Investigation|
This paper develops a new parity condition for international financial markets which relates differences between the forward exchange rate and the expected future exchange rate to interest rate term premiums. It begins with the general proposition that VIP cannot hold for all maturity horizons if interest rate term premiums are imperfectly correlated across countries and expectations are rational. The conditions under which VIP could hold for multiple horizons, under these two assumptions, are found to be very restrictive. It is argued that if VIP holds at all under these circumstances, it is only likely to hold at a very short time horizon. Finally, it is shown that under these assumptions, if VIP holds at the shortest time horizon then the difference between forward exchange rates and ex...
Published: Osler, C. L. "Interest Rate Term Premiums And The Failure Of Uncovered Interest Parity," Journal of International Financial Markets, Institutions and Money, 1992, v2(2), 1-25.
|August 1988||Terms of Trade and the Transmission of Output Shocks in a Rational Expectations Model|
This paper analyses the effects of productivity shocks on the current and future terms of trade and on output in a two country framework. An overlapping-generations model is used in which individuals allocate their savings between domestic and foreign capital assets according to their preferences for risk and return. Since production in both countries is specialized, changes its the terms of trade affect investment returns in both countries; rational expectations regarding such changes are assumed and a new approach to analyzing the comparative statics of rational expectations equilibria is developed. It is concluded that a temporary, positive productivity shock to the home country will cause the domestic terms of trade to depreciate initially and then to appreciate slowly back towards its...
|November 1987||Portfolio Diversification, Real Interest Rates, and the Balance of Payments|
The paper shows that differences in real interest rates across countries can arise even with perfect competition and fully integrated international capital markets. Specifically, we find that factor returns will differ across countries which are identical except for differences in technological riskiness, overall productivity, or labor force size. We also show that differences across countries in technological riskiness, in risk aversion, in population size and in overall productivity will lead to a non-zero current account in the steady state. Higher technological riskiness, greater risk aversion, and a larger population should be associated with a current account surplus. The analysis is carried out using a two-country Diamond overlapping-generations model in which technological uncertai...
Published: "Factor Prices Under Integrated Markets for Risky Capital" European Economic Review, Vol. 35, No. 6, pp. 89-107, (August 1991).
|Factor Prices and Welfare Under Integrated Capital Markets|
This paper considers the effect on factor prices and welfare of trade between economies whose production is characterized by nation-specific technological uncertainty. The analysis is carried out using a two-country Diamond overlapping-generations model in which technological uncertainty is reflected in factor prices, and "equities" refer to claims on the returns to capital. We find that trade in capital is complementary to trade in commodities, in the sense that adding free trade in capital to the spectrum of permitted economic activities will cause significant changes in wages, output, and capital returns. Furthermore, for countries which are identical, or not very different, factor prices move in parallel when free trade in capital is introduced. Specifically, as we show in the text, ca...
Published: "Explaining the Absence of International Factor-Price Convergence" Journal of International Money and Finance, Vol. 10, No. 1, (March 1991).