Exchange Rate Determination under Limits to CIP Arbitrage

We gratefully acknowledge financial support from the Bankard Fund for Political Economy and the Swiss National Science Foundation. We would like to thank Ozge Akinci (discussant), Ryan Chahrour, Linda Goldberg, Harald Hau, Amy Huber, Moritz Lenel, Angelo Ranaldo, Fabiola Ravazzolo, Hillary Stein as well as seminar participants at the Dallas and NY Feds, the IMF, Purdue University, Emory University, Keio University, Peking University, the SED congress in Barcelona, the SFI research days, the NY Fed and Fed Board of Governors conference on “The International Roles of the Dollar” and the UVA-Duke-Richmond Research Conference. We gratefully acknowledge financial support from the Bankard Fund for Political Economy and the Swiss National Science Foundation. This paper represents the views of the authors, which are not necessarily the views of the Federal Reserve Bank of Dallas, the Federal Reserve System, or the National Bureau of Economic Research. An earlier draft of this paper circulated under the title “Dollar Shortages, CIP Deviations, and the Safe Haven Role of the Dollar.”

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