Académique Documents
Professionnel Documents
Culture Documents
views or policies of the Asian Development Bank Institute (ADBI), the Asian
Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for
any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.
180
.5
Interest Exchange
160
0
Exchange Rate
Interest Rate
140
-.5
120
-1
1.4
1.5
.5
1
.4
1
Euro interest
Interest
1.2
Euro/CHF
US$/CHF
.9
Interest Exchange
Exchange
.3
.5
.8
1
.2
.7
-.5
.1
.8
8/2011 1/2015 8/2011 1/2015
140
Exchange
British interest
.1
Interest
120
GBP/CHF
.7
Yen/CHF
Exchange
.05
100
.6
0
Interest
-.05
80
.5
-.1
8/2011 1/2015
8/2011 1/2015
4
1/2015
Slope=-.18 (.15)
Exchange rate volatility
9/2011
2
8/2011
1
0
-1 -.5 0 .5
Interest rate
Standard deviation of change in daily log effective exchange rate (%); 30-day annualized interest rate
1.2
1.2
Slope=.62 (.18) Slope=.08 (.03) Slope=-.01 (.01)
.8
.8
.8
.4
.4
.4
0
0
-.5 0 .5 1 1.5 2 2.5 -.5 0 .5 1 1.5 2 2.5 -.5 0 .5 1 1.5 2 2.5
1.2
1.2
.8
.8
.4
.4
.4
0
0
-.5 0 .5 1 1.5 2 2.5 -.5 0 .5 1 1.5 2 2.5 -.5 0 .5 1 1.5 2 2.5
Interest rate Interest rate Interest rate
Standard deviation of change in daily log effective exchange rate (%); 30-day annualized interest rate
0 1 2 3
0 1 2 3
1/2015 1/2015
Volatility
2 3 4 5 6 2 4 6 8 4 6 8 10
0 1 2 3
0 1 2 3
1/2015 1/2015 1/2015
Volatility
0 1 2 3
01234
12/2014 1/2015
Volatility
1/2015
1/2015
5 10 15 20 .4 .5 .6 .7 .8 4 6 8 10 12
National interest rate National interest rate National interest rate
Standard deviation of change in daily log bilateral Swiss exchange rate (%); 30-day annualized interest rate
8
6
6
4
4
2
2
0
0
-1 -.5 0 .5 0 10 20 30
Swiss interest rate National interest rate
Exchange rate volatility
4
4
DNK
All Outliers 1/2015 BGR
CZE
SWE
EUR
3
3
JPN
2
2
1
1
0
0
-.6 -.3 0 .3 .6 -.2 -.1 0 .1 .2
National interest rate < .6% -.2% < National interest rate < .2%
Standard deviation of change in daily log bilateral Swiss exchange rate (%); 30-day annualized interest rate
15 30
0
0
-30 -15
-30 -15
Slope=.39 (.18) Slope=.56 (.19)
0 2 4 6 8 10 0 2 4 6 8 10
Positive Interest Rates (2354 obs) Two Negative Interest Rates (15 obs)
15 30
0 1 2
0
-2 -1
-30 -15
Slope=31 (18)
Slope=-.10 (.23)
-.2-.1 .1 .2 .3
Density
0
0 5
Slope=.08 (.22)
-.2-.1 .1 .2 .3
-.15 .15
0
0
Slope=.93 (.20)
-.3
Slope=.43 (.25)
.1 .2
Slope=.17 (.87) Slope=-.13 (.01)
0
0
-.2 -.1
-.3
Euro interest <=-.25%, 114 Obs Euro interest [-.05%,0), 171 Obs
.3
.1 .2
Slope=-.69 (1.16) Slope=.35 (.19)
0
0
-.2 -.1
-.3
Notes:
No risk premium, rational expectations, large sample: =0, =1,
==0
Much of literature has <1 (often negative)
MA errors, so use Newey-West standard errors
Negative Nominal Interest Rates and Exchange Rates 29
Fama Regressions: NIRP as intercept
Slope Intercept One Negative Two Negative Observations
Interest Rate Interest Rates
Cumulative returns
Swiss Franc, (3) Swiss Franc, (5) Swiss Franc, (10)
Flow returns
0 75 150
0 75 150
0 75 150
10
10
10
0
0
0
-10
-10
-10
Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16
Cumulative returns
Pound Sterling, (3) Pound Sterling, (5) Pound Sterling, (10)
Flow returns
0 75 150
0 75 150
0 75 150
10
10
10
0
0
-10
-10
-10
Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16
Cumulative returns
American Dollar, (3) American Dollar, (5) American Dollar, (10)
Flow returns
0 75 150
0 75 150
0 75 150
10
10
10
0
0
-10
-10
-10
Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16
Flow/cumulative returns: thin/thick, solid/dashed line, left/right axis. Implicit interest rates.
Cumulative returns
Swiss Franc, (3) Swiss Franc, (5) Swiss Franc, (10)
0 25 50
0 25 50
0 25 50
5
5
-5
-5
-5
-15
-15
-15
Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16
Cumulative returns
Pound Sterling, (3) Pound Sterling, (5) Pound Sterling, (10)
0 25 50
0 25 50
0 25 50
5
5
-5
-5
-5
-15
-15
-15
Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16
Cumulative returns
American Dollar, (3) American Dollar, (5) American Dollar, (10)
0 25 50
0 25 50
0 25 50
5
5
5
-5
-5
-5
-15
-15
-15
Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16 Jan 10 Jan 12 Jan 14 Jan 16
% Flow/cumulative returns: thin/thick, solid/dashed line, left/right axis. LIBOR/Euro/National interest rates.