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Replication data for: Ambiguity Aversion: Implications for the Uncovered Interest Rate Parity Puzzle

Version
V0
Resource Type
Dataset
Creator
  • Ilut, Cosmin
Publication Date
2012-07-01
Description
  • Abstract

    High interest rate currencies tend to appreciate in the future relative to low interest rate currencies instead of depreciating as uncovered interest parity (UIP) predicts. I construct a model of exchange rate determination in which ambiguity-averse agents face a dynamic filtering problem featuring signals of uncertain precision. Solving a max-min problem, agents act upon a worst-case signal precision and systematically underestimate the hidden state that controls payoffs. Thus, on average, agents next periods perceive positive innovations, which generates an upward re-evaluation of the strategy's profitability and implies ex post departures from UIP. The model also produces predictable expectational errors, negative skewness, and time-series momentum for currency speculation payoffs. (JEL D81, F31, G15)
Availability
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Relations
  • Is supplement to
    DOI: 10.1257/mac.4.3.33 (Text)
Publications
  • Ilut, Cosmin. “Ambiguity Aversion: Implications for the Uncovered Interest Rate Parity Puzzle.” American Economic Journal: Macroeconomics 4, no. 3 (July 2012): 33–65. https://doi.org/10.1257/mac.4.3.33.
    • ID: 10.1257/mac.4.3.33 (DOI)

Update Metadata: 2020-05-18 | Issue Number: 2 | Registration Date: 2019-10-13

Ilut, Cosmin (2012): Replication data for: Ambiguity Aversion: Implications for the Uncovered Interest Rate Parity Puzzle. Version: V0. ICPSR - Interuniversity Consortium for Political and Social Research. Dataset. https://doi.org/10.3886/E114250