Abstract

http://ssrn.com/abstract=120248
 
 

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Endogenous Exchange Rate Volatility, Trading Volume and Interest Rate Differentials in a Model of Portfolio Selection


May Hagiwara


University of North Carolina (UNC) at Chapel Hill - Department of Economics

Miguel Herce


CRA International, Inc.


Review of International Economics

Abstract:     
This paper considers a portfolio model of exchange rate determination and focuses on endogenous sources of exchange rate volatility. We show that, in addition to volatility transmitted by conditionally heteroskedastic interest rates, the larger the serial correlation in interest rates the stronger the effect of interest rate differentials on exchange rate volatility. These features are supported by the data. We also look at the volume-volatility relationship implied by the model.

JEL Classification: F31, G11, G12

Accepted Paper Series


Not Available For Download

Date posted: August 30, 1998  

Suggested Citation

Hagiwara, May and Herce, Miguel, Endogenous Exchange Rate Volatility, Trading Volume and Interest Rate Differentials in a Model of Portfolio Selection. Review of International Economics. Available at SSRN: http://ssrn.com/abstract=120248

Contact Information

May Hagiwara (Contact Author)
University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )
Chapel Hill, NC 27599
United States
919-966-5343 (Phone)
919-966-4986 (Fax)
Miguel Herce
CRA International, Inc. ( email )
1201 F. St. NW
Ste. 700
Washington, DC 20004
United States
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