On the Time Varying Risk Premium in the Yen/Dollar Exchange Market

Canova, Fabio
Ito, Takatoshi
1987-11
Thumbnail Image

View/Download File

1987-244.pdf (1.54 MB)

Persistent link to this item

https://hdl.handle.net/11299/55522
Statistics
View Statistics

Journal Title

Journal ISSN

Volume Title

Title

On the Time Varying Risk Premium in the Yen/Dollar Exchange Market

Authors

Published Date

1987-11

Publisher

Center for Economic Research, Department of Economics, University of Minnesota

Type

Working Paper

Abstract

The purpose of this paper is two-fold. First, a vector autoregressive model (VAR) is constructed to investigate the relative importance of monetary and real factors in the determination of the the yen/dollar exchange rate. Second, the forecasts from the VAR model are used to calculate a risk premium series. We show that real factors, represented by the stock price indices, statistically account f9r the dollar appreciation better than monetary factors, represented by the intere5t rates. The dynamic structure of interdependence between the exchange rate and the domestic variables changed considerably after October 1982. The risk premium calculated from the model shows a volatile and time-varying nature. The hypothesis of no risk premium is strongly rejected for the entire sample and each of the two subsamples considered.

Keywords

Description

Related to

Replaces

License

Collections

Center for Economic Research Discussion Papers

Series/Report Number

Discussion Paper
 244

Funding information

Isbn identifier

Doi identifier

Previously Published Citation

Canova, F. and Ito, T., (1987), "On the Time Varying Risk Premium in the Yen/Dollar Exchange Market", Discussion Paper No. 244, Center for Economic Research, Department of Economics, University of Minnesota.

Suggested citation

Canova, Fabio; Ito, Takatoshi. (1987). On the Time Varying Risk Premium in the Yen/Dollar Exchange Market. Retrieved from the University Digital Conservancy, https://hdl.handle.net/11299/55522.

Content distributed via the University Digital Conservancy may be subject to additional license and use restrictions applied by the depositor. By using these files, users agree to the Terms of Use. Materials in the UDC may contain content that is disturbing and/or harmful. For more information, please see our statement on harmful content in digital repositories.