Deviations from interest rate parity in small open economies: A quantitative-theoretical investigation
It is frequently claimed that the expected yield on emerging market bonds commands a premium. Here we investigate the sources of this phe-nomenon. A stochastic general equilibrium model of a small open economy is analyzed numerically to derive conditions for interest rate premia. The novelty of our approach is to attack the problem form the point of view of state dependent policy mixes. The main lessons include: if positive premia were universal, then 1. nominal rigidity should be important, 2. monetary authorities might have a current account stabilization motive, and 3. taste shocks possibly play some role in emerging markets.
Year of publication: |
2004-02
|
---|---|
Authors: | Ambrus-Lakatos, Lorand ; Vilagi, Balazs ; Vincze, Janos |
Institutions: | Közgazdaság-tudományi Intézet, Közgazdaság- és Regionális Tudományi Kutatóközpont |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Ambrus-Lakatos, Lorand, (2004)
-
Price Rigidity and Strategic Uncertainty An Agent-based Approach
Somogyi, Robert, (2011)
-
Tax Morale and Tax Evasion: Social Preferences and Bounded Rationality
Meder, Zsombor Z., (2012)
- More ...