Exchange-Rate Expectations and Nominal Interest Differentials: A Test ofthe Fisher Hypothesis
This note tests the hypothesis that nominal interest differentials between similar assets denominated in different currencies can be explained entirely by the expected change in the exchange rate over the holding period. This proposition, often called the "Fisher open" hypothesis or the hypothesis of perfect asset substitutability, has been a major component of recent theories of exchange-rate determination, and has important implications for monetary policy.
|Date of creation:||Aug 1980|
|Date of revision:|
|Publication status:||published as Cumby Robert E. and Obstfeld, Maurice. "A Note on Exchange-Rate Expectations and Nominal Interest Differentials: A Test of the Fisher Hypothesis." The Journal of Finance, Vol. XXXVI, No. 3, (June 1981), pp. 697-703.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Upson, Roger B., 1972. "Random Walk and Forward Exchange Rates: A Spectral Analysis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 7(04), pages 1897-1905, September.
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- Richard Meese & Kenneth J. Singleton, 1980. "Rational expectations, risk premia, and the market for spot and forward exchange," International Finance Discussion Papers 165, Board of Governors of the Federal Reserve System (U.S.).
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