Liquidity premia and interest rate parity

Simple item page
dc.contributor.authorLinnemann, Ludger
dc.contributor.authorSchabert, Andreas
dc.date.accessioned2013-10-29T12:48:52Z
dc.date.available2013-10-29T12:48:52Z
dc.date.issued2013-10-29
dc.description.abstractRisk-free assets denominated in US currency not only offer a pecuniary return, but also provide transactions services, both nationally and internationally. Accordingly, the responses of bilateral US dollar exchange rates to interest rate shocks should differ substantially with respect to the (US or foreign) origin of the shock. We demonstrate this empirically and apply a model of liquidity premia on US treasuries originating from monetary policy implementation. The liquidity premium leads to a modi fication of uncovered interest rate parity (UIP), which is able to explain observed deviations of exchange rate dynamics from UIP predictions. In line with empirical evidence, the model predicts an appreciation of the US dollar subsequent to an increase in US interest rates as well as in SOE interest rates.en
dc.identifier.urihttp://hdl.handle.net/2003/31144
dc.identifier.urihttp://dx.doi.org/10.17877/DE290R-10838
dc.language.isoende
dc.relation.ispartofseriesDiscussion Paper / SFB 823;43/2013en
dc.subjectexchange rate dynamicsen
dc.subjectliquidity premiaen
dc.subjectmonetary policy shocksen
dc.subjectuncovered interest rate parityen
dc.subject.ddc310
dc.subject.ddc330
dc.subject.ddc620
dc.titleLiquidity premia and interest rate parityen
dc.typeTextde
dc.type.publicationtypeworkingPaperde
dcterms.accessRightsopen access

Files

Original bundle
Now showing 1 - 1 of 1
Thumbnail Image
Name:
DP_4313_SFB823_Linnemann_Schabert.pdf
Size:
249.39 KB
Format:
Adobe Portable Document Format
Description:
DNB
Download
License bundle
Now showing 1 - 1 of 1
No Thumbnail Available
Name:
license.txt
Size:
1.02 KB
Format:
Item-specific license agreed upon to submission
Description:
Download

Collections

Sonderforschungsbereich (SFB) 823