【Macro Seminar】Uncovered Interest Rate Parity Puzzle and Sunspot Fluctuations
2023/09/12
研討會日期 : 2023-09-12
時間 : 14:30
主講人 : Professor Yasuo Hirose
地點 : Conference Room B110
演講者簡介 : Professor Yasuo Hirose received his PhD from Johns Hopkins University in 2007. He is currently a Professor at Keio University. His research interests are Macroeconomics, Monetary Economics, and Solution and Estimation Techniques for Dynamic Stochastic General Equilibrium Models.
演講摘要 : Empirical evidence has constantly rejected the uncovered interest rate parity (UIP)
condition, well known as the UIP puzzle. We evaluate the empirical performance of
a small open-economy model for Canada incorporating an endogenous risk premium on foreign bond holdings so that the resulting modified UIP condition can exhibit a negative relationship between expected exchange rate depreciation and interest rate differentials as the UIP puzzle suggests. Because the model is susceptible to equilibrium indeterminacy, we estimate it with Bayesian methods allowing for both determinacy and indeterminacy of equilibrium. Our results show that the data strongly favor indeterminacy over determinacy and that the estimated model can account for the UIP puzzle both unconditionally and conditionally. Variance decompositions demonstrate that a shock to the modified UIP condition is the main driving force of exchange rate fluctuations whereas sunspot shocks play a secondary role.
