We explain the currency carry trade performance using an asset pricing model in which factor loadings are regime-dependent rather than constant. Empirical results show that a typical carry trade strategy has much higher exposure to the stock market and is mean-reverting in regimes of high FX...

In this paper, we revisit the link between currency misalignments and economic growth by taking into account foreign currency-denominated debt dynamics for the CFA zone countries over the period 1985–2011. Relying on a BEER approach and using panel cointegration techniques, we first derive...

Intertemporal shifts in conduct, such as a transition from competitive to anti-competitive behavior, induce shifts in the firms’ equilibrium price configurations. Such shifts generate non-stationary price dynamics in addition to those which originate from exogenous fundamentals. We exploit...