Exchange rates and interest rates: can t
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Ahmet Can Inci; Biao Lu
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Article
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2004
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Elsevier Science
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English
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We construct an international term structure model that has excellent empirical performance in tracking movements of exchange rates and currency returns. The forward premium puzzle is accounted for, yet the model does not have the undesirable properties found in Backus et al. (J. Finance 56 (2001) 2