Good Carry, Bad Carry

We acknowledge many fruitful suggestions by Raymond Kan and discussions with Gurdip Bakshi, Utpal Bhattacharya, Steve Riddiough, Giorgio Valente and Jialin Yu, who also helped us obtain some of the data used in the paper. Participants at the 2016 Annual Conference in International Finance at City University of Hong Kong, the Bank of England, Banca d’Italia and ECB 6-thWorkshop on Financial Determinants of Foreign Exchange Rates, and seminars at Nanyang Technology University, UNSW, SAIF and Xiamen University provided helpful insights. Any remaining errors are our responsibility alone. Panayotov acknowledges support from a Hong Kong RGC Research grant (No. 16505715). The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.