Determinants of carry trades in Central and Eastern Europe
In 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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- 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.
- 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.
- 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.
- 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.
- 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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