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Author : Adrian W. Throop
Publisher :
ISBN 13 :
Total Pages : 36 pages
Book Rating : 4.:/5 (92 download)
Download or read book A Generalized Uncovered Interest Parity Model of Real Exchange Rates written by Adrian W. Throop and published by . This book was released on 1992 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Adrian W. Throop
Publisher :
ISBN 13 :
Total Pages : 36 pages
Book Rating : 4.:/5 (274 download)
Download or read book A Generalized Uncovered Interest Parity Model of Real Exchange Rates written by Adrian W. Throop and published by . This book was released on 1992 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Saeid Mahdavi
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)
Download or read book Simple Vs. Generalized Interest Rate and Purchasing Power Parity Models of Exchange Rates written by Saeid Mahdavi and published by . This book was released on 1998 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We construct a model in which the real exchange rate is affected by the real interest rate and price differentials as well as real factors that cause shocks to the expected flexible-price equilibrium value of the real exchange rate. The model is then employed to test for the "generalized" uncovered interest rate parity and purchasing power parity relations using the data for eight advanced countries and the cointegration technique. Simple versions of the parity conditions are also tested for the purpose of comparisons. We find evidence of cointegration only for the generalized version of the parity relations. Also, out-of-sample forecasts generated from error-correction models indicate that they are more accurate relative to those obtained from a random walk model for half of the countries in the sample.
Author : Peter Isard
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 16 pages
Book Rating : 4.:/5 (318 download)
Download or read book Uncovered Interest Parity written by Peter Isard and published by International Monetary Fund. This book was released on 2006-04 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides an overview of the uncovered interest parity assumption. It traces the history of the interest parity concept, summarizes evidence on the empirical validity of uncovered interest parity, and discusses different interpretations of the evidence and the implications for macroeconomic analysis. The uncovered interest parity assumption has been an important building block in multiperiod models of open economies, and although its validity is strongly challenged by the empirical evidence, at least at short time horizons, its retention in macroeconomic models is supported on pragmatic grounds by the lack of much empirical support for existing models of the exchange risk premium.
Author : Mr.Peter Isard
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 14 pages
Book Rating : 4.:/5 (318 download)
Download or read book Uncovered Interest Parity written by Mr.Peter Isard and published by International Monetary Fund. This book was released on 1991-05 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: This note provides an overview of the uncovered interest parity assumption. It traces the history of the interest parity concept, summarizes evidence on the empirical validity of uncovered interest parity, and discusses the implications for macroeconomic analysis. The uncovered interest parity assumption has been an important building block in multiperiod and continuous time models of open economies, and although its validity is strongly challenged by the empirical evidence, its retention in macroeconomic models is supported on pragmatic grounds, at least for the time being, by the lack of much empirical support for existing models of the exchange risk premium.
Author : Eleftherios Giovanis
Publisher : GRIN Verlag
ISBN 13 : 3640538552
Total Pages : 121 pages
Book Rating : 4.6/5 (45 download)
Download or read book A Research Examination of Covered-Uncovered Interest Rate Parity and the Purchase Power Parity (PPP) Hypothesis: Applications in MATLAB, RATS and EVIEWS written by Eleftherios Giovanis and published by GRIN Verlag. This book was released on 2010-02 with total page 121 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2008 in the subject Business economics - Investment and Finance, grade: 95.00%, language: English, abstract: This project examines in the first part the covered and uncovered interest parity between US dollar and Swiss Franc. We present simple summary statistics, unit root tests, deviations from covered interest parity, regression analysis, threshold autoregression and exponential transition autoregression. Then we present the uncovered interest parity and, as in the case of covered interest parity, we apply some tests to examine if it's valid. We apply Johansen cointegration tests between spot and forward rates, but also between forward premia and interest rates differentials and we test if there is a cointegration equation and we estimate the vector error correction model. After this procedure we present the impulse responses. Next we test if there is a threshold cointegration relation between the above variables. Finally in the last section we apply a dynamic OLS (DOLS) estimation with Newey-West HAC standard errors. In the second part the purchasing power parity (PPP) hypothesis is examined with a similar methodology followed, where additionally we present a long span study, unit root tests allowing for structural breaks in data, panel unit root tests as also Markov switching regime autoregressive model is examined in the category of the non linear models
Author : Evan Tanner
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.:/5 (318 download)
Download or read book Deviations From Uncovered Interest Parity written by Evan Tanner and published by International Monetary Fund. This book was released on 1998-08 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Ex-post deviations from uncovered interest parity (UIP) – realized differences between dollar returns on identical assets of different currencies – equal the real interest differential plus real exchange rate growth. Among industrialized countries, UIP deviations are largely explained by unanticipated real exchange rate growth, but among developing countries, real interest differentials are “where the action is.” This observation is due to the greater variability of inflation in developing countries, but may also stem from higher and more variable risks and capital controls in these countries. Also, among developing countries with moderate inflation, offsetting comovements of real interest differentials and real exchange growth support the sticky-price hypothesis.
Author : Charles Engel
Publisher :
ISBN 13 :
Total Pages : 45 pages
Book Rating : 4.:/5 (74 download)
Download or read book “The” Real Exchange Rate, Real Interest Rates, and the Risk Premium written by Charles Engel and published by . This book was released on 2011 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: The well-known uncovered interest parity puzzle arises from the empirical regularity that, among developed country pairs, the high interest rate country tends to have high expected returns on its short term assets. At the same time, another strand of the literature has documented that high real interest rate countries tend to have currencies that are strong in real terms - indeed, stronger than can be accounted for by the path of expected real interest differentials under uncovered interest parity. These two strands - one concerning short-run expected changes and the other concerning the level of the real exchange rate - have apparently contradictory implications for the relationship of the foreign exchange risk premium and interest-rate differentials. This paper documents the puzzle, and shows that existing models appear unable to account for both empirical findings. The features of a model that might reconcile the findings are discussed.
Author : Guy Meredith
Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.:/5 (321 download)
Download or read book Long-horizon Uncovered Interest Rate Parity written by Guy Meredith and published by . This book was released on 1998 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Uncovered interest parity (UIP) has been almost universally rejected in studies of exchange rate movements, although there is little consensus on why it fails. In contrast to previous studies, which have used relatively short-horizon data, we test UIP using interest rates on longer-maturity bonds for the G-7 countries. These long-horizon regressions yield much more support for UIP -- all the coefficients on interest differentials are of the correct sign, and almost all are closer to the UIP value of unity than to the zero coefficient implied by the random walk hypothesis. We then use a small macroeconomic model to explain the differences between the short- and long-horizon results. Regressions run on data generated by stochastic simulations replicate the important regularities in the actual data, including the sharp differences between short- and long-horizon parameters. In the short run from risk premium shocks in the face of endogenous monetary policy. In the long run, in contrast, exchange rate movements are driven by the "fundamentals," leading to a relationship between interest rates and exchange rates that is more consistent with UIP.
Author : Burton Hollifield
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book A Test of Uncovered Interest Rate Parity in Segmented International Commodity Markets written by Burton Hollifield and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we examine the effect of segmented commodity markets on the relationship between the forward exchange rates premium and changes in the future spot rates in a general equilibrium model. Market segmentation is modeled by introducing a proportional cost for transferring physical goods between countries, as in Dumas (1992). We derive the reduced form relationship between interest differentials and the spot exchange rate change in this economy. For reasonable parameter values, the theoretical regression coefficient from regressing changes in the nominal spot rate on the forward premium can be less than one. We test the reduced form relationships on weekly exchange rate data, and on monthly exchange rate, inflation and ex-ante interest rate data from four countries. Using weekly nominal data, we find that the additional explanatory variables suggested by our model do not explain much of the deviations from uncovered interest rate parity. We also test the model using estimates of ex-ante real interest rates and find that inflation and real exchange rates must be correlated to explain the data.
Author : Charles Engel
Publisher :
ISBN 13 :
Total Pages : 37 pages
Book Rating : 4.:/5 (95 download)
Download or read book Exchange Rates, Interest Rates, and the Risk Premium written by Charles Engel and published by . This book was released on 2015 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: The well-known uncovered interest parity puzzle arises from the empirical regularity that, among developed country pairs, the high interest rate country tends to have high expected returns on its short term assets. At the same time, another strand of the literature has documented that high real interest rate countries tend to have currencies that are strong in real terms -- indeed, stronger than can be accounted for by the path of expected real interest differentials under uncovered interest parity. These two strands -- one concerning short-run expected changes and the other concerning the level of the real exchange rate -- have apparently contradictory implications for the relationship of the foreign exchange risk premium and interest-rate differentials. This paper documents the puzzle, and shows that existing models appear unable to account for both empirical findings. The features of a model that might reconcile the findings are discussed.
Author : Mr.Eugenio M Cerutti
Publisher : International Monetary Fund
ISBN 13 : 1484395212
Total Pages : 36 pages
Book Rating : 4.4/5 (843 download)
Download or read book Covered Interest Parity Deviations: Macrofinancial Determinants written by Mr.Eugenio M Cerutti and published by International Monetary Fund. This book was released on 2019-01-16 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: For about three decades until the Global Financial Crisis (GFC), Covered Interest Parity (CIP) appeared to hold quite closely—even as a broad macroeconomic relationship applying to daily or weekly data. Not only have CIP deviations significantly increased since the GFC, but potential macrofinancial drivers of the variation in CIP deviations have also become significant. The variation in CIP deviations seems to be associated with multiple factors, not only regulatory changes. Most of these do not display a uniform importance across currency pairs and time, and some are associated with possible temporary considerations (such as asynchronous monetary policy cycles).
Author : Geert Bekaert
Publisher :
ISBN 13 :
Total Pages : 31 pages
Book Rating : 4.:/5 (248 download)
Download or read book Uncovered Interest Rate Parity and the Term Structure written by Geert Bekaert and published by . This book was released on 2002 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines uncovered interest rate parity (UIRP) and the expectations hypotheses of the term structure (EHTS) at both short and long horizons. The statistical evidence against UIRP is mixed and is currency- not horizon-dependent. Economically, the deviations from UIRP are less pronounced than previously documented. The evidence against the EHTS is statistically more uniform, but, economically, actual spreads and theoretical spreads (spreads constructed under the null of the EHTS) do not behave very differently, especially at long horizons. Partly because of this, the deviations from the EHTS only play a minor role in explaining deviations from UIRP at long horizons. A random walk model for both exchange rates and interest rates fits the data marginally better than the UIRP-EHTS model
Author : Charles Engel
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (129 download)
Download or read book Exchange Rates and Interest Parity written by Charles Engel and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper surveys recent theoretical and empirical contributions on foreign exchange rate determination. The paper first considers monetary models under uncovered interest parity and rational expectations. Then the paper considers deviations from UIP/rational expectations: foreign exchange risk premium, private information, near-rational expectations, and peso problems.
Author : Hiruni Kaushala
Publisher :
ISBN 13 :
Total Pages : 14 pages
Book Rating : 4.:/5 (13 download)
Download or read book The Uncovered Interest Rate Parity - A Literature Review written by Hiruni Kaushala and published by . This book was released on 2016 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: Interest rates and exchange rates are considered to be one of the most discussed areas in International Finance. When considering the main theories that explore on these two variables, Uncovered Interest Rate Parity (UIP) states that the interest rate differential is an unbiased predictor of the spot exchange rate changes. The impact on investors' attitude is that they would be indifferent towards the returns on domestic and foreign assets denominated in same currency thereby eliminating any short term arbitrage profits. Studies of this nature are of significance in the case of Sri Lanka, as a country which is trade dependent accurate forecasts of exchange rates would be of immense importance. Hence this study focuses on reviewing what is revealed by literature so far and what is not.
Author : Jordi Galí
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (115 download)
Download or read book Uncovered Interest Parity, Forward Guidance, and the Exchange Rate written by Jordi Galí and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Under uncovered interest parity (UIP), the size of the effect on the real exchange rate of an anticipated change in real interest rate differentials is invariant to the horizon at which the change is expected. Empirical evidence using US, euro area and UK data points to a substantial deviation from that invariance prediction: expectations of interest rate differentials in the near (distant) future are shown to have much larger (smaller) effects on the real exchange rate than is implied by UIP. Some possible explanations are discussed.
Author : Young-Kyu Moh
Publisher :
ISBN 13 :
Total Pages : 117 pages
Book Rating : 4.:/5 (254 download)
Download or read book Exchange Rate Dynamics in a Continuous-time Model of Uncovered Interest Parity with Central Bank Intervention written by Young-Kyu Moh and published by . This book was released on 2003 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt:
