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We apply extreme value theory to assess the tail dependence between three currency crises measures and 18 economic indicators commonly used for predicting crises. In our pooled sample of 46 countries in the period 1974-2008, we find that nearly all pairs of variables are asymptotically...
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Interest rate differentials between China and the rest of the world provide an attractive target for currency carry trade strategies, but remains problematic due to existing capital controls. We focus on copper holdings as an asset used to facilitate the carry trade. Using a unique dataset of...
Persistent link: https://www.econbiz.de/10013020274
We empirically test Gabaix and Maggiori (2015)’s prediction that currencies are repriced by the country’s external capital dependence when financial constraints of FX intermediaries change. Using solvency indicators, we develop a novel intermediary constraints index capturing riskbearing...
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In a no-arbitrage framework, any variable that affects the pricing of the domestic yield curve has the potential to predict foreign exchange risk premiums. The most widely used interest rate predictor is the difference in short rates across countries, known as carry, but the short rate is only...
Persistent link: https://www.econbiz.de/10013133966
We propose a simple identification scheme for the causes of the violations of uncovered interest parity. Our method uses the serial dependence patterns of excess returns as a criterion for judging performance of economic models. We show that a mean reverting component in excess returns,...
Persistent link: https://www.econbiz.de/10012895804
In this study, we develop a synergistic forecasting model using the information fusion approach. By using high frequency (one-minute) foreign exchange (FX) data, the model fuses two standalone models, namely the technical analysis structural model and the intra-market model. Subsequently, the...
Persistent link: https://www.econbiz.de/10012922710