Title: An Empirical Evaluation of the Portfolio Model for the Dollar-Mark Exchange Rate
Abstract: This paper estimates the monetary and the portfolio model for the dollar-mark exchange rate. It turns out that German and US bonds are imperfect substitutes and the observed exchange rate fluctuations are to a significant part due to a varying risk premium. The risk premium reflects relative indeptedness and inflation risk but not real exchange rate risk.
Creation-Date: October 1992
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