Rare Disasters and Exchange Rates*

• 成果类型: Article
• 署名作者: Farhi, Emmanuel; Gabaix, Xavier
• 署名单位: Harvard University; New York University
• 刊物名称: QUARTERLY JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0033-5533
• DOI: 10.1093/qje/qjv040
• 发表日期: 2016
• 页码: 1-52
• 关键词: asset prices; long-run; RISK; Currency; consumption; explanation; habit; returns; MARKETS; puzzles

摘要

We propose a new model of exchange rates, based on the hypothesis that the possibility of rare but extreme disasters is an important determinant of risk premia in asset markets. The probability of world disasters as well as each country's exposure to these events is time-varying. This creates joint fluctuations in exchange rates, interest rates, options, and stock markets. The model accounts for a series of major puzzles in exchange rates: excess volatility and exchange rate disconnect, forward premium puzzle and large excess returns of the carry trade, and comovements between stocks and exchange rates. It also makes empirically successful signature predictions regarding the link between exchange rates and telltale signs of disaster risk in currency options.