International Yield Curves and Currency Puzzles

• 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
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13191
• 发表日期: 2023
• 页码: 209-245
• 关键词: term structure models; exchange-rates; RISK; DYNAMICS; MARKETS; premium; TRADE; INFORMATION; bond

摘要

The currency depreciation rate is often computed as the ratio of foreign to domestic pricing kernels. Using bond prices alone to estimate these kernels leads to currency puzzles: the inability of models to match violations of uncovered interest parity and the volatility of exchange rates. This happens because of the FX bond disconnect, the inability of bonds to span exchange rates. Incorporating innovations to the pricing kernel that affect exchange rates but not bonds helps resolve the puzzles. This approach also allows one to relate news about cross-country differences between international yields to news about currency risk premiums.