International Asset Pricing with Recursive Preferences

摘要: Focusing on data from the United States and Kingdom, we document that both anomaly identified by Backus Smith, which concerns low correlation between consumption differentials exchange rates, forward premium anomaly, tendency of high interest rate currencies to appreciate, have become more severe over time. Taking into account different capital mobility regimes, show these anomalies turn general equilibrium regularities in a two-country two-good economy with Epstein Zin preferences, frictionless markets, correlated long-run growth prospects.