scholarly journals Apparent exchange rate imaging: On its applicability and the connection to the real exchange rate

2021 ◽  
Vol 86 (2) ◽  
pp. 677-692
Author(s):  
Dominik Ludwig ◽  
Frederik Bernd Laun ◽  
Mark Edward Ladd ◽  
Peter Bachert ◽  
Tristan Anselm Kuder
Keyword(s):  
Exchange Rate ◽  
Real Exchange Rate ◽  
The Real

Carry Trade, Exchange Rates, and the Balance-of-Payments

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Nelson H. Barbosa-Filho
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Real Exchange Rate ◽  
Foreign Debt ◽  
Balance Of Payments ◽  
Forward Rate ◽  
Spot Rate ◽  
Financial Constraint ◽  
Carry Trade ◽  
The Real

Abstract This paper presents a partial equilibrium model that integrates interest rate arbitrage with the balance-of-payments constraint to determine the real exchange rate. The sequential logic is the following: (i) carry-trade determines the term premium, with the spot rate showing greater volatility than the forward rate, (ii) uncovered interest rate parity determines the spot rate based on the real exchange rate consistent with a financial constraint, defined as a stable ratio of foreign reserves to foreign debt; and (iii) the trade balance consistent with the financial constraint determines the long-run real exchange rate for a given ratio of domestic to foreign income.

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