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Yoshiko Suzuki
''Return of the Japan premium in the abenomics period''
( 2017, Vol. 37 No.2 )
This study is an extension of the recent study by Suzuki (2016) that investigated factors contributing to the deviations from covered interest parity (CIP) in euro/dollar cross-currency swaps during the European debt crisis. The widening of the cross-currency basis or deviations from CIP has traditionally been associated with financial stress or credit risks. This study is unique as it not just looks into these traditional factors, but also investigates the influence of financial regulations, currency volatility and monetary policy divergence between the United States and Japan. While Abenomics urges yield-hungry Japanese investors to buy more U.S. dollar assets, new regulations discourage global banks from extending dollar loans via FX swaps.
Keywords: Basis, Foreign Exchange Swaps, Covered Interest Parity, Monetary Policy Divergence, Financial Regulations
JEL: F3 - International Finance: General
E4 - Money and Interest Rates: General
Manuscript Received : Feb 10 2017 Manuscript Accepted : Jun 16 2017

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