Determinants of carry trades in Central and Eastern Europe
AbstractThe article shows that carry trades to Central and Eastern Europe (CEE) were lucrative during the boom period 2004--2006 when interest rate spreads between the funding and investment currencies were high. In contrast, when liquidity risk and exchange rate volatility increased after 2007, carry trades were unprofitable. The analysis further suggests that there is a link between the exchange rate regime and carry trade returns. Overall, exchange rate stabilization, particularly via managed floats, seems to go along with the highest profit opportunities.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Financial Economics.
Volume (Year): 22 (2012)
Issue (Month): 18 (September)
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Web page: http://www.tandfonline.com/RAFE20
Other versions of this item:
- Hoffmann, Andreas, 2011. "Determinants of carry trades in Central and Eastern Europe," Working Papers 102, University of Leipzig, Faculty of Economics and Management Science.
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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CESifo Working Paper Series
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Wiley Blackwell, vol. 61(4), pages 711-734, November.
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