Determinants of carry trades in Central and Eastern Europe
AbstractIn this paper, I analyze determinants of carry trade returns in Central and Eastern Europe (CEE). I show that carry trades to CEE were lucrative due to interest rate spreads between the funding and investment currency from 2004 to 2006. They became unprofitable when liquidity risk and exchange rate volatility increased after 2007. The analysis suggests that the exchange rate regime of the CEE economy matters for carry trade returns. Overall, exchange rate stabilization, particularly via managed floats, seems to allow for the highest profit opportunities. --
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Bibliographic InfoPaper provided by University of Leipzig, Faculty of Economics and Management Science in its series Working Papers with number 102.
Date of creation: 2011
Date of revision:
carry trades; emerging markets; exchange rates;
Other versions of this item:
- A. Hoffmann, 2012. "Determinants of carry trades in Central and Eastern Europe," Applied Financial Economics, Taylor & Francis Journals, vol. 22(18), pages 1479-1490, September.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-27 (All new papers)
- NEP-MAC-2012-02-27 (Macroeconomics)
- NEP-MON-2012-02-27 (Monetary Economics)
- NEP-TRA-2012-02-27 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andreas Hoffmann & Gunther Schnabl, 2011.
"A Vicious Cycle of Manias, Crises and Asymmetric Policy Responses – An Overinvestment View,"
The World Economy,
Wiley Blackwell, vol. 34(3), pages 382-403, 03.
- Hoffmann, Andreas & Schnabl, Gunther, 2009. "A Vicious Cycle of Manias, Crashes and Asymmetric Policy Responses - An Overinvestment View," MPRA Paper 18532, University Library of Munich, Germany.
- Andreas Hoffmann & Gunther Schnabl, 2009. "A Vicious Cycle of Manias, Crashes and Asymmetric Policy Responses - An Overinvestment View," CESifo Working Paper Series 2855, CESifo Group Munich.
- Paul Grauwe & Gunther Schnabl, 2004. "EMU entry strategies for the new member states," Intereconomics: Review of European Economic Policy, Springer, vol. 39(5), pages 241-246, September.
- Hoffmann, Andreas, 2009.
"An Overinvestment Cycle in Central and Eastern Europe?,"
15668, University Library of Munich, Germany.
- Andreas Hoffmann, 2010. "An Overinvestment Cycle In Central And Eastern Europe?," Metroeconomica, Wiley Blackwell, vol. 61(4), pages 711-734, November.
- Eling, Martin & Schuhmacher, Frank, 2007. "Does the choice of performance measure influence the evaluation of hedge funds?," Journal of Banking & Finance, Elsevier, vol. 31(9), pages 2632-2647, September.
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