Exchange Rates and Interest Parity*
Charles Engel, University of Wisconsin, Madison, WI, USA, National Bureau of Economic Research, Cambridge, MA, USA
This chapter surveys recent theoretical and empirical contributions on foreign exchange rate determination. The chapter first examines monetary models under uncovered interest parity and rational expectations, and then considers deviations from UIP/rational expectations: foreign exchange risk premium, private information, near-rational expectations, and peso problems.
Uncovered interest parity
Foreign exchange risk premium
JEL classification codes
1 Exchange Rates and Interest Parity
This chapter surveys empirical and theoretical research ...