Template-Type: ReDIF-Paper 1.0 Author-Name: Jun Nagayasu Author-Name-First: Jun Author-Name-Last: Nagayasu Author-Email: Jun Nagayasu Author-Workplace-Name: Faculty of engineering, information & systems, University of Tskuba Title: The forward premium puzzle and the euro Abstract: This paper evaluates the forward premium puzzle using the Euro exchange rate. Unlike previous studies, our analysis utilizes time-varying parameter methods and is based on two approaches for evaluation of the puzzle; the traditional approach analyzing the sensitivity of interest rate differentials to the forward premium, and the other looking into deviations from the covered interest rate parity (CIRP) condition. Then we provide evidence that the forward premium puzzle indeed became more prominent around the time of the recent crisis periods such as the Lehman Shock and the Euro crisis. This is also shown to be consistent with a deterioration in the CIRP. Length: 26 pages Creation-Date: 2013-08 Revision-Date: Publication-Status: Published File-URL: http://www.strath.ac.uk/media/1newwebsite/departmentsubject/economics/research/researchdiscussionpapers/2013/13-17FINAL.pdf File-Format: Application/pdf Number: 1317 Classification-JEL: F31, F36 Keywords: forward premium puzzle, risk premium, time varying parameters, financial crises Handle: RePEc:str:wpaper:1317