Exchange Rate Behavior with Negative Interest Rates: Some Early Negative Observations

45 Pages Posted: 20 Sep 2016

See all articles by Allaudeen Hameed

Allaudeen Hameed

National University of Singapore (NUS) - Department of Finance

Andrew Kenan Rose

University of California - Haas School of Business; NUS Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: September 2016

Abstract

This paper examines exchange rate behavior during the recent period with negative nominal interest rates. We use a daily panel of data of 61 currencies from Jan 2010 through May 2016; during this time five economies (Denmark, EMU, Japan, Sweden, and Switzerland) experienced negative nominal interest rates. We examine both effective exchange rates and bilateral rates, the latter typically measured against the Swiss franc since Switzerland has had the longest period of negative nominal rates. We examine exchange rate volatility, exchange rate changes, deviations from uncovered interest parity, and profits from the carry trade. We find that negative interest rates seem to have little effect on observable exchange rate behavior.

Keywords: carry, daily, data, deviation, interest, nominal, parity, Trade, uncovered, volatility

JEL Classification: F31, G15

Suggested Citation

Hameed, Allaudeen and Rose, Andrew Kenan, Exchange Rate Behavior with Negative Interest Rates: Some Early Negative Observations (September 2016). CEPR Discussion Paper No. DP11498, Available at SSRN: https://ssrn.com/abstract=2840695

Allaudeen Hameed (Contact Author)

National University of Singapore (NUS) - Department of Finance ( email )

Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore

HOME PAGE: http://bizfaculty.nus.edu.sg/faculty-details/?profId=1

Andrew Kenan Rose

University of California - Haas School of Business ( email )

Berkeley, CA 94720
United States
510-642-6609 (Phone)
510-642-4700 (Fax)

HOME PAGE: http://faculty.haas.berkeley.edu/arose

NUS Business School ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1
Abstract Views
739
PlumX Metrics