Quantifying the "Peso Problem" Bias: A Switching Regime Approach
AbstractThis paper provides an estimate of the peso problem bias in relation to the forward discount puzzle. we argue that the EMS provides a natural laboratory for studying such effects. We suggest an endogenous, data-driven procedure to classify those ocservations, that are to be deleted from the regression of the exchange rate returns on the appropriate interest rate differential in order to isolate the peso problem bias. We then apply a pooled regression technique to obtain reasonable efficient slope estimates, and find the estimate of the peso problem bias to be equal to -.6, statistically as well as economically significant.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Aarhus, Aarhus School of Business, Department of Business Studies in its series Finance Working Papers with number 00-15.
Length: 22 pages
Date of creation: 01 Aug 2000
Date of revision:
Contact details of provider:
Postal: The Aarhus School of Business, Fuglesangs Allé 4, DK-8210 Aarhus V, Denmark
Fax: + 45 86 15 19 43
Web page: http://www.asb.dk/about/departments/bs.aspx
More information through EDIRC
Peso problems; EMS exchange rates; Regime switching;
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helle Vinbaek Stenholt).
If references are entirely missing, you can add them using this form.