流動性溢酬對匯率預測的能力和風險溢酬動態的影響

In the first year of this project, we extend the Taylor rule model of exchange rate determination by incorporating the liquidity yield on government bonds and investigate exchange rate predictability. We find that the liquidity yield on government bonds delivers additional predictive power to future exchange rate movements beyond the model with Taylor rule fundamentals, using both in-sample and out-of-sample tests. In particular, the model with liquidity yield exhibits superior predictive power after the currency swap market frictions are controlled. While in the second year of this project, we empirically investigate the relationship between the convenience yield of government bonds and the real exchange rates using monthly data spanning from 1999 to 2018. We extend the conventional models, based on present-value relationship between real exchange rate and economic fundamentals, while explicitly considering the role of the convenience yield. Empirical results suggest that our present-value models are able to capture the dynamic properties of the real exchange rate documented in literature, including high persistence, and excess volatility and co-movement compared with real interest rate differentials. We also find the sum of expected convenience yields significantly drives real exchange rate movements. Moreover, we found that foreign exchange swap market friction also plays a role in explaining real exchange rates. Finally, we identified a deviation with regard to the monetary policy rule, and found that monetary policy at the zero lower bound is also significant for yen–dollar real exchange rate modeling.