The PPP View of Multihorizon Currency Risk Premiums

• 成果类型: Article
• 署名作者: Chernov, Mikhail; Creal, Drew
• 署名单位: University of California System; University of California Los Angeles; National Bureau of Economic Research; Center for Economic & Policy Research (CEPR); University of Notre Dame
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhaa114
• 发表日期: 2021
• 页码: 2728
• 关键词: term structure; Carry trade; long-run; bond; explanation; STOCK; models; habit

摘要

Exposures of expected future nominal depreciation rates to the current interest rate differential violate the UIP hypothesis in a pattern that is a nonmonotonic function of horizon. Forward expected nominal depreciation rates are monotonic. We explain the two patterns by simultaneously incorporating the weak form of PPP into a joint model of the stochastic discount factor, the nominal exchange rate, and domestic and foreign yield curves. Departures from PPP generate the first pattern. The risk premiums for these departures generate the second pattern. Thus, the variance of the stochastic discount factor is related to the real exchange rate.