On the Foreign Exchange Risk Premium in Sticky-Price General Equilibrium Models |
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| Authors: | Charles Engel |
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| Affiliation: | (1) Department of Economic, University of Washington and NBER, Seattle, WA, 98195 |
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| Abstract: | The properties of the foreign exchange risk premium in general equilibrium models with sticky nominal pricesare examined. In these models, risk premiums arise endogenously because monetary shocks lead to covariationof consumption and exchange rates. In some cases, the risk premiums are much larger than those produced inneoclassical general equilibrium models. |
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| Keywords: | foreign exchange risk premium interest parity sticky prices |
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