Under mild assumptions, the data indicate that fluctuations in nominal interest rate differentials across currencies are primarily fluctuations in time-varying risk. This finding is an immediate implication of the fact that exchange rates are roughly random walks. If most fluctuations in interest differentials are thought to be driven by monetary policy, then the data call for a theory which explains how changes in monetary policy change risk. Here we propose such a theory based on a general equilibrium monetary model with an endogenous source of risk variation—a variable degree of asset market segmentation.
- Federal Reserve Bank of Minneapolis. Research Department
- Federal Reserve Bank of Minneapolis
- Dans Collection:
Contenu téléchargeableTélécharger le fichier PDF
Download a zip file that contains all the files in this work.
|La vignette||Titre||Date de téléchargement||Visibilité||actes|