The Forward-Discount Puzzle in Central and Eastern Europe
This source preferred by Jens Holscher
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Authors: Hayward, R. and Hölscher, J.
Journal: Comparative Economic Studies
© 2017 Association for Comparative Economic Studies. This paper adds to evidence that the forward-discount puzzle is at least in part explained as a compensation for taking crash risk. A number of Central and Eastern European exchange rates are compared. A hidden Markov model is used to identify two regimes for most of the exchange rates. These two regimes can be characterised as being either periods of calm or periods of crisis The level of international risk aversion and changes in US interest rates affect the probability of switching from one regime to the other. This model is then used to assess the way that these two factors affect the probability of a currency crisis. While the Czech Republic, Hungary and Bulgaria are very sensitive to international financial conditions, Poland and Romania are relatively immune.
This data was imported from Web of Science (Lite):
Authors: Hayward, R. and Hoelscher, J.
Journal: COMPARATIVE ECONOMIC STUDIES