Exploring the Yen Carry Trade: Investor’s Choice of Target Currencies
Abstract/Contents
- Abstract
- Empirical studies have shown that carry trade plays an increasingly important role in driving exchange rate movements. Because carry trade can have an enormous impact on macroeconomic factors, understanding basic characteristics of carry trade will be useful for both researchers and policymakers in countries susceptible to carry trade speculations. Focusing on the yen carry trade, this paper seeks to determine what factors investors take into account when they choose target currencies. I accomplish this by estimating the relationship between carry trade volume and other economic and financial variables for nine selected countries in the Asia-Pacific region using a simple multiple regression model. I find that the interest rate differential and a country’s credit rating have statistically significant positive effects on carry trade volume while exchange rate movement does not affect the volume as strongly. The results also suggest that advanced economies are more prone to carry trade speculation, and therefore the risks of unwinding are greater in those countries.
Description
Type of resource | text |
---|---|
Date created | May 2010 |
Creators/Contributors
Author | Tosborvorn, Thiti | |
---|---|---|
Primary advisor | McKinnon, Ronald | |
Degree granting institution | Stanford University, Department of Economics |
Subjects
Subject | Stanford Department of Economics |
---|---|
Subject | carry trade |
Subject | unwinding |
Subject | exchange rate |
Subject | capital flow |
Subject | interest differential |
Genre | Thesis |
Bibliographic information
Access conditions
- Use and reproduction
- User agrees that, where applicable, content will not be used to identify or to otherwise infringe the privacy or confidentiality rights of individuals. Content distributed via the Stanford Digital Repository may be subject to additional license and use restrictions applied by the depositor.
Preferred citation
- Preferred Citation
- Tosborvorn, Thiti. (2010). Exploring the Yen Carry Trade: Investor’s Choice of Target Currencies. Stanford Digital Repository. Available at: https://purl.stanford.edu/rf758km5223
Collection
Stanford University, Department of Economics, Honors Theses
View other items in this collection in SearchWorksContact information
- Contact
- econ@stanford.edu
Also listed in
Loading usage metrics...