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Do Term Premiums Matter? Transmission Via Exchange Rate Dynamics
| Content Provider | Scilit |
|---|---|
| Author | Katagiri, Mitsuru Takahashi, Koji |
| Copyright Year | 2019 |
| Description | Journal: SSRN Electronic Journal The macroeconomic effect of term premiums is a controversial issue both theoretically and quantitatively. In this paper, we explore the possibility that term premiums affect inflation and the real economy via exchange rate dynamics. For this purpose, we construct a small open economy model with limited asset market participation, focusing on the empirical fact that uncovered interest parity (UIP) holds better for longer-term interest rate differentials. A quantitative exercise using Japanese and U.S. data shows that changes in term premiums of both Japanese and U.S. long-term yields have sizable effects on Japanese inflation rates via exchange rate dynamics. |
| Related Links | http://www.boj.or.jp/en/research/wps_rev/wps_2017/data/wp17e07.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3392729 |
| ISSN | 10914358 |
| e-ISSN | 15565068 |
| DOI | 10.2139/ssrn.3392729 |
| Journal | SSRN Electronic Journal |
| Language | English |
| Publisher | Elsevier BV |
| Publisher Date | 2019-05-20 |
| Access Restriction | Open |
| Subject Keyword | Journal: SSRN Electronic Journal Exchange Rate Term Premium Uncovered Interest Rate Parity |
| Content Type | Text |
| Resource Type | Article |
| Subject | Public Health, Environmental and Occupational Health Psychiatry and Mental Health |
