Exposures of expected future depreciation rates to the current interest rate differential violate the UIP hypothesis in a distinctive pattern that is a non-monotonic function of horizon. Conversely, forward, or risk-adjusted expected depreciation rates are monotonic. We explain the two patterns jointly by incorporating the weak form of PPP, aka stationarity of the real exchange rate, into a joint model of the stochastic discount factor, the nominal exchange rate, inflation differential, domestic and foreign yield curves. Short-term departures from PPP generate the first pattern. The risk premiums for these departures generate the second pattern. Thus, the variance of the stochastic discount factor must be related to the real exchange rate deepening the exchange rate disconnect. We illustrate the challenge in the context of workhorse consumption-based models. JEL Classification Codes: F31, F47, G12, G15.

中文翻译：

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多水平货币风险溢价的PPP观点

预期的未来折旧率对当前利率差异的暴露以独特的方式违反了UIP假设，这是地平线的非单调函数。相反，远期或经风险调整的预期折旧率是单调的。我们通过将购买力平价的弱形式（即实际汇率的平稳性）纳入随机贴现因子，名义汇率，通货膨胀率差，国内外收益率曲线的联合模型中，共同解释这两种模式。与PPP的短期背离产生了第一个模式。这些偏离的风险溢价产生了第二种模式。因此，随机贴现因子的方差必须与实际汇率有关，从而加深了汇率的脱节。我们在以工作马消费为基础的模型的背景下说明了挑战。JEL分类代码：F31，F47，G12，G15。