시가변 위험프리미엄을 고려한 이자율평가설

Time Varying Risk-Adjusted Interest Rate Parity : An Analysis based on the Dynamic Stochastic General Equilibrium Model

Particularly important equation in the existing open economy dynamic stochastic general equilibrium (DSGE) models is the uncovered interest parity (UIP) relationship. Models rely on the UIP relationship to capture the relationship between the domestic-foreign interest rate differential and the movement of exchange rate. According to the UIP relationship, (1) regression of the rate of depreciation of the domestic currency against the lagged interest rate differential should produce the slope estimate equal to one and (2) there should be immediate appreciation of domestic currency followed by gradual depreciation after contractionary domestic monetary policy shock. These implications tend to be strongly rejected by the data. This paper investigates whether open economy DSGE modelling and UIP relationship can be better harmonized if the UIP relationship is adjusted to include the time varying risk premium term. When the model is estimated with the risk premium, hump-shaped response of exchange rate to monetary policy shock that is typically found in the empirical evidence could be produced. However, the log marginal likelihood is higher with the model estimated without the risk premium adjustment. This is especially so with Korean data. Further investigation to supplement/modify UIP relation would be worthwhile.