Carry Trades and Currency Crashes

Markus K. Brunnermeier, Stefan Nagel, Lasse H. Pedersen

NBER Working Paper No. 14473
Issued in November 2008, Revised in December 2013

---- Acknowledgments ----

Special thanks goes to Craig Burnside, Gabriele Galati, Jean Imbs, Jakub Jurek, Hanno Lustig, Igor Makarov, Michael Melvin, Martin Oehmke, Nikolai Roussanov, Adrien Verdelhan and the editors Daron Acemoglu, Ken Rogoff and Mike Woodford. We are also grateful to comments from seminar participants at New York University, BGI, International Monetary Fund and conference participants at the German Economists Abroad conference, the American Economics Association Meetings 2008, NBER Behavioral Finance Meetings and P. Woolley Center at the London School of Economics. Brunnermeier acknowledges financial support from the Alfred P. Sloan Foundation. Lasse Pedersen is affiliated with AQR Capital Management, a global asset management firm that may apply some of the principles discussed in this research in some of its investment products. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.

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