Why Does the Spot-Forward Discount Fail
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Charles A.E. Goodhart; Patrick C. McMahon; Yerima L. Ngama
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Article
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1997
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John Wiley and Sons
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English
โ 131 KB
We use the Phillips and Hansen (1990) modified procedure to estimate the cointegrating vector between F t , the forward exchange rate, and S t1 , the appropriate spot rate. We find that the coefficient b, from the equation, S t1 a bF t e t1 to be very close to, but significantly different from, 1 (a