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Time-varying international diversification and the forward premium

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  • Jonen, Benjamin
  • Scheuring, Simon
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    Abstract

    This paper reproduces the slope of the uncovered interest rate parity (UIP) regression for ten country pairs within one standard deviation under rational expectations. We propose an infinite horizon dynamic stochastic general equilibrium model with incomplete markets. Heterogeneous investors experience varying risk aversion as a result of habit formation.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Money and Finance.

    Volume (Year): 40 (2014)
    Issue (Month): C ()
    Pages: 128-148

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    Handle: RePEc:eee:jimfin:v:40:y:2014:i:c:p:128-148

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    Web page: http://www.elsevier.com/locate/inca/30443

    Related research

    Keywords: Forward premium; Habits; International diversification;

    References

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