Pippenger's CIP-based solution to the forward-bias puzzle: A rejoinder

Pippenger (2011a) proposed a solution to the longstanding forward-bias puzzle that attracted several comments, to which he has recently replied (Pippenger, 2011b). In this rejoinder it is argued that the points Pippenger raises in defence of his solution do not effectively rebut the concerns originally raised. In addition, his model is found to generate puzzling regression results when applied to real-world data. It is shown that these results arise because his model's coefficients represent (potentially biased) estimates of the covered interest parity equation's coefficients.