Revisiting the Forward Premium Anomaly Using Consumption Habits
A New Keynesian Model
Bibliographic Data
| ID | 9722391 |
|---|---|
| Authors | Bianca De Paoli (Federal Reserve Bank of New York), Jens Søndergaard (0000-0002-1629-1864, Capital Group) |
| Year | 2017 |
| Volume | 84 |
| Issue | 335 |
| Pages | 516-540 |
| Publication date | 2017-07-01 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | Economica (JOURNAL) |
| Journal identifiers | ISSN: 0013-0427 • E-ISSN: 1468-0335 |
| Publisher | Wiley (PUBLISHER • GB) |
| DOI | 10.1111/ecca.12181 |
| OpenAlex | W2324379560 |
| Language | EN |
| References cited | 46 |
This paper revisits the ability of consumption habits to resolve the forward premium anomaly as documented in the literature. We show that the favourable results obtained in an endowment setting crucially depend on having persistent dynamics in excess consumption, and do not appear to hold up in a production economy with nominal rigidities. The inability of such models to match equity and term premium has often been emphasized in the closed economy literature. Our findings suggest that this shortcoming also extends to open economy models and their ability to explain foreign exchange premia
Anomaly (physics) · Consumption (sociology) · Economics · Endowment · Equity premium puzzle · Exchange rate · Foreign exchange · Macroeconomics · Monetary economics · Monetary policy · New Keynesian economics · Open economy · Risk premium · Economic theories and models · Financial Markets and Investment Strategies · Monetary Policy and Economic Impact
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| Citation velocity | historical |
|---|---|
| Highly cited | No |