The Failure of Covered Interest Rate Parity: FX Hedging Demand and Costly Balance Sheets

They use similar measures to those we employ in Chapters 2 & 3 to estimate long-term demands for FX hedging, which they consider to be the primary driver of structural CIP deviations. Further additional cyclical deviations can also be caused by global or country-specific liquidity crises.

Borio, C. and McCauley R. and McGuire P. and Sushko V. (October 2016).  BIS Working Papers, NO. 590.  

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