Destabilizing carry trades

Plantin, Guillaume and Shin, Huyn (2014) Destabilizing carry trades. TSE Working Paper, n. 14-512, Toulouse

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Official URL: http://tse-fr.eu/pub/28367

Abstract

We offer a model of currency carry trades in which carry traders earn positive excess returns if they successfully coordinate on supply- ing excessive capital to a target economy. The interest-rate differential between their funding currency and the target currency is their coor- dination device. We solve for a unique equilibrium that exhibits the classic pattern of the carry-trade recipient currency appreciating for extended periods, punctuated by sharp falls.

Item Type: Monograph (Working Paper)
Language: English
Date: June 2014
Place of Publication: Toulouse
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 16 Mar 2015 14:49
Last Modified: 20 Nov 2018 11:17
OAI ID: oai:tse-fr.eu:28367
URI: http://publications.ut-capitole.fr/id/eprint/16543

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