Interest rates directly affect currency rates. Higher rates attract foreign investors seeking better returns, which strengthens the local currency. This is because, when rates are high, so are yields.
We offer a unifying empirical model of covered and uncovered currency premia, interest rates and spot and forward exchange rates, both in the cross section and time series of currencies. We find that ...
One of my undergrad students just asked why the exchange rate notations that I use in my class are different from what he ...
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