The anomalous forward premium of EUR/RSD exchange rate
Theoretically, exchange rate fluctuations should be positively related to interest-rate differential. This paper empirically examines whether such a relationship holds between EUR/RSD exchange rate and the corresponding interbank interest rates. Estimates on daily data between 2008 and 2015 obtained...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Economics institute, Belgrade
2015-01-01
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| Series: | Industrija |
| Subjects: | |
| Online Access: | http://scindeks-clanci.ceon.rs/data/pdf/0350-0373/2015/0350-03731504089B.pdf |
| Summary: | Theoretically, exchange rate fluctuations should be positively related to interest-rate differential. This paper empirically examines whether such a relationship holds between EUR/RSD exchange rate and the corresponding interbank interest rates. Estimates on daily data between 2008 and 2015 obtained from a linear regression model indicate that this relationship is in fact negative, consistent with the forward premium anomaly. The result persists over different time horizons. The exchange-rate predictability builds over time. The uncovered interest-rate parity does not hold. |
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| ISSN: | 0350-0373 2334-8526 |