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Effects of Speculation and Interest Rates in a "Carry Trade" Model of Commodity Prices

Frankel, Jeffrey A. - 2013

The paper presents and estimates a model of the prices of oil and other storable commodities, a model that can be characterized as reflecting the carry trade. It focuses on speculative factors, here defined as the trade-off between interest rates on the one hand and market participants'...

Persistent link: https://www.econbiz.de/10013075796

The Forward Exchange Market, Speculation, and Exchange Market Intervention

Eaton, Jonathan; Turnovsky, Stephen J. - 2021

This paper develops a stochastic equilibrium model of an open economy incorporating speculation in the forward exchange … market. The model is used to examine two issues. The first is the role of speculation in stabilizing the economy against … stochastic disturbances. Much risk averse speculation stabilizes domestic income against disturbances in the domestic bond market …

Persistent link: https://www.econbiz.de/10013247678

The "Speculative Efficiency" Hypothesis

Bilson, John F. O. - 2008

to characterize the state envisaged under the hypothesis. If a market is subject to efficient speculation, the supply of …

Persistent link: https://www.econbiz.de/10012774764

The Profitability of Currency Speculation

Bilson, John F. - 2000

This paper presents the results of a post-sample simulation of a speculative strategy using a portfolio of foreign currency forward contracts.The main new features of the speculative strategy are (a)the use of Kalman filters to update the forecasting equation, (b) the allowance for...

Persistent link: https://www.econbiz.de/10012788637

Rational Speculation and Exchange Rates

Duarte, Margarida; Stockman, Alan C. - 2021

variables. Therefore, the model has the potential to deliver changes in exchange rates, resulting from rational speculation … like asset prices. However, it does not generate a sufficient degree of rational speculation to explain either observed …

Persistent link: https://www.econbiz.de/10013229053

When are Fixed Exchange Rates Really Fixed?

Velasco, Andrés - 2021

This paper analyzes the sustainability of fixed exchange rates by extending the Barro-Gordon framework to a fully dynamic context in which the level of a state variable (in this case debt) determines the payoffs available to the government at each point in time. The model yields the following...

Persistent link: https://www.econbiz.de/10013222968

Perspectives on the Recent Currency Crisis Literature

Flood, Robert P.; Marion, Nancy Peregrim - 2021

In the 1990s, currency crises in Europe, Mexico and Southeast Asia have drawn worldwide attention to speculative attacks on government-controlled exchange rates. To improve our understanding of these events, researchers have undertaken new theoretical and empirical work. In this paper, we...

Persistent link: https://www.econbiz.de/10013224322

A Model of Crises in Emerging Markets

Dooley, Michael P. - 2021

First generation models of speculative attacks show that apparently random speculative attacks on policy regimes can be fully consistent with rational and well-informed speculative behavior. Unfortunately, models driven by a conflict between exchange rate policy and other macroeconomic...

Persistent link: https://www.econbiz.de/10013238941

Political Contagion in Currency Crises

Drazen, Allan - 2021

Existing models of contagious currency crises are summarized and surveyed, and it is argued that more weight should be put on political factors. Towards this end, the concept of political contagion introduced, whereby contagion in speculative attacks across currencies arises solely because of...

Persistent link: https://www.econbiz.de/10013239960

Investor Overconfidence and the Forward Premium Puzzle

Burnside, A. Craig - 2010

We offer an explanation for the forward premium puzzle in foreign exchange markets based upon investor overconfidence. In the model, overconfident individuals overreact to their information about future inflation, which causes greater overshooting in the forward rate than in the spot rate. Thus,...

Persistent link: https://www.econbiz.de/10013145237