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Some Contagion, Some Interdependence: More Pitfalls in Tests of Financial Contagion

Corsetti, Giancarlo; Pericoli, Marcello; Sbracia, Massimo - C.E.P.R. Discussion Papers - 2002

This Paper develops a test of contagion in financial markets based on bivariate correlation analysis, which generalizes …

Persistent link: https://www.econbiz.de/10005791976

Exchange Rate Forecasting, Order Flow and Macroeconomic Information

Rime, Dagfinn; Sarno, Lucio; Sojli, Elvira - C.E.P.R. Discussion Papers - 2009

This paper adds to the research efforts that aim to bridge the divide between macro and micro approaches to exchange rate economics by examining the linkages between exchange rate movements, order flow and expectations of macroeconomic variables. The basic hypothesis tested is that if order flow...

Persistent link: https://www.econbiz.de/10004972168

Which Fundamentals Drive Exchange Rates? A Cross-Sectional Perspective

Sarno, Lucio; Schmeling, Maik - C.E.P.R. Discussion Papers - 2013

Standard present-value models suggest that exchange rates are driven by expected future fundamentals, implying that exchange rates contain information about future fundamentals. We test this key empirical prediction of present-value models in a sample of 35 currency pairs ranging from 1900 to...

Persistent link: https://www.econbiz.de/10011083568

The Scapegoat Theory of Exchange Rates: The First Tests

Fratzscher, Marcel; Sarno, Lucio; Zinna, Gabriele - C.E.P.R. Discussion Papers - 2012

This paper provides an empirical test of the scapegoat theory of exchange rates (Bacchetta and van Wincoop 2004, 2011), as an attempt to evaluate its potential for explaining the poor empirical performance of traditional exchange rate models. This theory suggests that market participants may at...

Persistent link: https://www.econbiz.de/10011084052

Macroeconomic Order Flows: Explaining Equity and Exchange Rate Returns

Dunne, Peter; Hau, Harald; Moore, Michael - C.E.P.R. Discussion Papers - 2004

Macroeconomic models of equity returns perform poorly. The proportion of daily index returns that these models explain is essentially zero. Instead of relying on macroeconomic determinants, our model includes a concept from microstructure order flow. Order flow is the proximate determinant of...

Persistent link: https://www.econbiz.de/10005788997

The Euro and the International Financial System

Portes, Richard - C.E.P.R. Discussion Papers - 2001

This Paper analyses the issues raised by EMU for the relationships between the Euro area and the international financial system. The depreciation of the Euro exchange rate since the beginning of EMU has attracted most attention. The Paper argues that theory and the data support none of the...

Persistent link: https://www.econbiz.de/10005792090

Volatility Clustering and Volatility Transmission: A Non-Parametric View of ERM Exchange Rates

Artis, Michael J; Zhang, Wenda - C.E.P.R. Discussion Papers - 1997

This paper considers the evidence for volatility clustering and transmission in six bilateral Deutsche mark ERM … given by the two distributions, each observation is classified to one or other category. The phenomenon of volatility … clustering in a given bilateral exchange rate series is then studied by means of a non-parametric test, while volatility …

Persistent link: https://www.econbiz.de/10005792273

Asset Prices, Exchange Rates and the Current Account

Fratzscher, Marcel; Juvenal, Luciana; Sarno, Lucio - C.E.P.R. Discussion Papers - 2009

This paper analyses the role of asset prices in comparison to other factors, in particular exchange rates, as a driver of the US trade balance. It employs a Bayesian structural VAR model that requires imposing only a minimum of economically meaningful sign restrictions. We find that equity...

Persistent link: https://www.econbiz.de/10008502576

Exchange Rates and Fundamentals: Footloose or Evolving Relationship?

Sarno, Lucio; Valente, Giorgio - C.E.P.R. Discussion Papers - 2008

Using novel real-time data on a broad set of economic fundamentals for five major US dollar exchange rates over the recent float, we employ a predictive procedure that allows the relationship between exchange rates and fundamentals to evolve over time in a very general fashion. Our key findings...

Persistent link: https://www.econbiz.de/10005123971

Properties of Foreign Exchange Risk Premiums

Sarno, Lucio; Schneider, Paul; Wagner, Christian - C.E.P.R. Discussion Papers - 2011

We study the properties of foreign exchange risk premiums that can explain the forward bias puzzle, defined as the tendency of high-interest rate currencies to appreciate rather than depreciate. These risk premiums arise endogenously from the no-arbitrage condition relating the term structure of...

Persistent link: https://www.econbiz.de/10009209825