Pippenger's CIP-based solution to the forward-bias puzzle: A rejoinder
Pippenger (2011a) proposed a solution to the longstanding forward-bias puzzle that attracted several comments, to which he has recently replied (Pippenger, 2011b). In this rejoinder it is argued that the points Pippenger raises in defence of his solution do not effectively rebut the concerns originally raised. In addition, his model is found to generate puzzling regression results when applied to real-world data. It is shown that these results arise because his model's coefficients represent (potentially biased) estimates of the covered interest parity equation's coefficients.
Volume (Year): 21 (2011)
Issue (Month): 5 ()
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- Pippenger, John, 2011. "The solution to the forward-bias puzzle," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(2), pages 296-304, April.
- Pippenger, John, 2011. "A Complete Solution To The Forward-Bias Puzzle," University of California at Santa Barbara, Economics Working Paper Series qt5gq9z4j0, Department of Economics, UC Santa Barbara.
- Sanders S., Chang, 2011. "On the (in)feasibility of covered interest parity as a solution to the forward bias puzzle," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(4), pages 611-616, October.
- Mark E. Wohar & Nathan S. Balke, 1998.
"Nonlinear dynamics and covered interest rate parity,"
Springer, vol. 23(4), pages 535-559.
- Balke, Nathan S. & Wohar, Mark E., 1997. "Nonlinear dynamics and covered interest rate parity," Working Papers 9701, Federal Reserve Bank of Dallas.
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