Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/101638
Authors: 
Broll, Udo
Eckwert, Bernhard
Year of Publication: 
1996
Series/Report no.: 
Diskussionsbeiträge: Serie II, Sonderforschungsbereich 178 "Internationalisierung der Wirtschaft", Universität Konstanz 299
Abstract: 
This paper constructs an intertemporal model of the spot and forward markets for foreign exchange and shows that in equilibrium the forward market is unbiased, i.e., the forward rate is equal to the expected spot rate which will prevail in the market next period. This holds true as long as the monetary authorities do not exogenously intervene in the foreign exchange market. Our analysis suggests that nominal exchange rate variability can affect the real sector of the economy only if active intervention policies are carried out on the spot exchange market.
Subjects: 
exchange rate risk
currency forward markets
risk premium
JEL: 
F31
F33
Document Type: 
Working Paper

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