{"id":16825,"date":"2015-11-29T18:02:41","date_gmt":"2015-11-29T17:02:41","guid":{"rendered":"https:\/\/business.uc3m.es\/\/working-papers\/monetary-policy-regimes-and-the-forward-bias-for-foreign-exchange\/"},"modified":"2015-11-29T18:02:41","modified_gmt":"2015-11-29T17:02:41","slug":"monetary-policy-regimes-and-the-forward-bias-for-foreign-exchange","status":"publish","type":"working-papers","link":"https:\/\/business.uc3m.es\/es\/working-papers\/monetary-policy-regimes-and-the-forward-bias-for-foreign-exchange\/","title":{"rendered":"Monetary policy regimes and the forward bias for foreign exchange"},"content":{"rendered":"<p>This paper provides a theoretical discussion of the forward premium anomaly. We reformulate the well-known  Lucas  (1982)  model  by  allowing  for  the  existence  of  monetary  policy  regimes.  The monetary  supply  is  viewed  as  having  two  stochastic  components:  a)  a  persistent  component  that reflects  the  preferences  of  the  central  bank  regarding  the  long-run  money  supply  or  inflation target, and b) a transitory component that represents short-lived interventions. To generate agents forecasts,  we  consider  two  scenarios:  a)  consumers  can  distinguish  the  permanent  and  the transitory components of the money supply, and b) consumers can observe only historical series of the aggregate monetary supply and face a signal-extraction problem. We simulate the model from a carefully estimation for the parameters involved in the model. Numerical simulations reveal that,<br \/>\nunder complete information, forward unbiasedness cannot be rejected at conventionally significant levels.  However,  when  learning  about  monetary  policy  is  incorporated,  the  forward  bias  can  be reproduced without artificially assuming an unreasonable degree of risk aversion.<\/p>\n","protected":false},"template":"","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}}},"class_list":["post-16825","working-papers","type-working-papers","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/business.uc3m.es\/es\/wp-json\/wp\/v2\/working-papers\/16825","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/business.uc3m.es\/es\/wp-json\/wp\/v2\/working-papers"}],"about":[{"href":"https:\/\/business.uc3m.es\/es\/wp-json\/wp\/v2\/types\/working-papers"}],"wp:attachment":[{"href":"https:\/\/business.uc3m.es\/es\/wp-json\/wp\/v2\/media?parent=16825"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}