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Testing Real Interest Parity In Emerging Markets
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Book Synopsis Testing Real Interest Parity in Emerging Markets by : Manmohan Singh
Download or read book Testing Real Interest Parity in Emerging Markets written by Manmohan Singh and published by International Monetary Fund. This book was released on 2006 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper finds significant deviations between short-term emerging market real interest rates and world real interest rates primarily due to the inflationary expectations of the local investor base. We test for long-run real interest convergence in emerging markets using a time varying panel unit root test proposed by Pesaran to capture the improved macro-economic fundamentals since early 1990s. We also estimate the speed of convergence in the presence of a shock. The paper suggests that real interest rates in the emerging markets show some convergence in the long run but real interest parity does not hold. Our results also find that the speed of adjustment of real rates to a shock is estimated to differ significantly across the emerging markets. Measured by their half-life, some emerging markets in Asia, E.Europe and S.Africa, where real interest rates are generally low, take much longer to adjust than where real interest rates are generally high (Latin America, Turkey). From a policy perspective, encouraging foreign investors to take direct exposure at the short end of the local debt market could lower the real interest rates in some emerging markets.
Book Synopsis IMF Working Papers by : Abhisek Banerjee
Download or read book IMF Working Papers written by Abhisek Banerjee and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Does the Real Interest Parity Hypothesis Hold? by :
Download or read book Does the Real Interest Parity Hypothesis Hold? written by and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis The Real Interest Rate Parity Hypothesis by :
Download or read book The Real Interest Rate Parity Hypothesis written by and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: "How internationally mobile is the world's supply of capital? Does capital flow among industrial countries to equalise the yield to investors? Alternatively, does the saving that originates in a country remain to be invested there? Or does the truth lie somewhere between these two extremes? The answers to these questions are not only important for understanding the international capital market but are critical for analysing a wide range of issues ..." [Feldstein and Horioka (1980), p. 314] The questions stated on the quote above, posed by Feldstein and Horioka (1980), still raise intense debate and resilient disagreement. It is peculiar that the liberalisation of capital and goods markets carried out in the last decades and the increasing speed of capital movement have not sealed the enigma put forward by Feldstein and Horioka (1980) more than twenty years ago. On the contrary, according to Obstfeld and Rogoff (2000, p. 341) this is still "one of the most robust and intractable puzzles in international finance". There are two central questions in this thesis. The first one is at the heart of Feldstein and Horioka (1980) concern: "Is there evidence on the existence of real interest rate differentials in a selected group of emerging and developed economies?" We provide an answer to this question in chapter 2. The second question: "What are the causes that underlie real interest rate differentials?" is the research objective of the next chapters. In brief, we investigate the existence and causes of ex post real interest rate differentials [rid(s) hereafter] in a group of economies. The countries chosen for our tests can be split into two groups. The first one comprises some small open-economies of emerging markets: Argentina, Brazil, Chile, Mexico and Turkey. The second group is composed of the open-economies of developed countries: France, Italy, Spain, the UK and Germany. Finally, we use the US as the reference large economy. The period of the tests broadly corresponds to the interval that spans from the mid 1990s to the beginning of the 2000s, with differences highlighted accordingly in each chapter. Both the period and the choice of the countries will be explained in following chapters, however, we can emphasise that this heterogeneous sample of countries allows inter-group comparisons and the detection of similar patterns between them(...).
Book Synopsis The Economics of the Uncovered Interest Parity Condition for Emerging Markets by : C. Emre Alper
Download or read book The Economics of the Uncovered Interest Parity Condition for Emerging Markets written by C. Emre Alper and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial account liberalizations since the second half of the 1980s paved the way for the burgeoning literature that investigates foreign exchange market efficiency in emerging markets (EMs) via testing for the uncovered interest parity (UIP) condition. This paper is the first to provide a broad and critical survey on this recent literature. Specifically, we attempt to answer the following questions. First, are the EMs different from the developed economies in the context of the UIP condition? Second, to what extent can these differences contribute to the debate on the UIP literature? Third, what are the empirical challenges specific to the EMs in testing for the UIP condition?
Book Synopsis Deviations From Uncovered Interest Parity by : Mr.Evan Tanner
Download or read book Deviations From Uncovered Interest Parity written by Mr.Evan Tanner and published by International Monetary Fund. This book was released on 1998-08-01 with total page 25 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.
Book Synopsis Interest Rates in Open Economies by : Dipak Das Gupta
Download or read book Interest Rates in Open Economies written by Dipak Das Gupta and published by . This book was released on 1994 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: Policymakers must address the central questions: How much do world interest rates influence domestic rates? And what are the respective roles of monetary policy, real interest parity, expectations of change in the exchange rate, and "country risk?"
Book Synopsis Tests of the Uncovered Interest Parity by : Aseem Shrestha
Download or read book Tests of the Uncovered Interest Parity written by Aseem Shrestha and published by . This book was released on 2014 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper carries out empirical testing of the Uncovered Interest Parity for US-Mexico, US-Brazil and US-Japan using general OLS and GARCH from monthly data. Similar to numerous other studies UIP failed to hold empirically. I also test if deviations from UIP are in any way effected by business cycles but did not find any supporting evidence. In contrast to a number of other studies my slope coefficient was significantly different from unity. The coefficient also showed a negative sign for one of the economies. Additionally, there were presence of ARCH and GARCH effects in UIP deviations. Finally, no evidence was found for UIP to hold better for developed nations like Japan and not for emerging markets like Mexico and Brazil.
Book Synopsis Uncovered Interest Parity at Distant Horizons by : Arnaud Mehl
Download or read book Uncovered Interest Parity at Distant Horizons written by Arnaud Mehl and published by . This book was released on 2007 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper tests for uncovered interest parity (UIP) at distant horizons for the US and its main trading partners, including both mature and emerging market economies, also exploring the existence of nonlinearities. At long and medium horizons, it finds support in favour of the standard, linear, specification of UIP for dollar rates vis-à-vis major floating currencies, but not vis-à-vis emerging market currencies. Moreover, the paper finds evidence that, not only yield differentials widen, but that US bond yields do react in anticipation of exchange rate movements, notably when these take place vis-à-vis major floating currencies. Last, the paper detects signs of nonlinearities in UIP at the medium term horizon for dollar rates vis-à-vis some of the major floating currencies, albeit surrounded by some uncertainty.
Book Synopsis Covered Interest Parity Deviations: Macrofinancial Determinants by : Mr.Eugenio M Cerutti
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).
Book Synopsis A New Test for Market Efficiency and Uncovered Interest Parity by : Richard T. Baillie
Download or read book A New Test for Market Efficiency and Uncovered Interest Parity written by Richard T. Baillie and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We suggest a new single-equation test for Uncovered Interest Parity (UIP) based on a dynamic regression approach. The method provides consistent and asymptotically efficient parameter estimates, and is not dependent on assumptions of strict exogeneity. This new approach is asymptotically more efficient than the common approach of using OLS with HAC robust standard errors in the static forward premium regression. The coefficient estimates when spot return changes are regressed on the forward premium are all positive and remarkably stable across currencies. These estimates are considerably larger than those of previous studies, which frequently find negative coefficients. The method also has the advantage of showing dynamic effects of risk premia, or other events that may lead to rejection of UIP or the efficient markets hypothesis.
Book Synopsis A New Test of the Real Interest Rate Parity Hypothesis by : George Bagdatoglou
Download or read book A New Test of the Real Interest Rate Parity Hypothesis written by George Bagdatoglou and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The real interest rate parity hypothesis is tested using data for the group of seven industrialized countries (G7) over the period 1970-2008. The contribution is two-fold. First, the paper utilizes the bounds approach in order to overcome uncertainty about the order of integration of real interest rates. Second, a test is made for structural breaks in the underlying relationship using a multiple structural breaks test. The results indicate significant parameter instability and suggest that, despite the advances in economic and financial integration, real interest rate parity has not fully recovered from a breakdown in the 1980s.
Book Synopsis Dread of Depreciation by : Jayasri Dutta
Download or read book Dread of Depreciation written by Jayasri Dutta and published by . This book was released on 2002 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Testing International Parity Conditions for a Small Open Developing Economy by : Wee Beng Gan
Download or read book Testing International Parity Conditions for a Small Open Developing Economy written by Wee Beng Gan and published by . This book was released on 1989 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Real Interest Rate Parity by : Pierre L. Siklos
Download or read book Real Interest Rate Parity written by Pierre L. Siklos and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the restrictions required for real interest rate parity to hold. Employing the multivariate cointegration procedure, allowances are made for exogenous events (such as oil price shocks and currency realignments within the EMS) which may have disturbed any underlying long-run relationship between variables. The results show that restrictions required for real interest rate parity are easily rejected for monthly euro-deposit data for six OECD countries, namely Canada, Belgium, the U.S., France, and Germany over the period 1975-1992. Findings also indicate that care must be taken in doing empirical work in this area because results can be sensitive to a number of important choices that must be made in specifying and interpreting results from cointegration tests.
Book Synopsis Time Horizon and Uncovered Interest Parity in Emerging Economies by : Tamat Sarmidi
Download or read book Time Horizon and Uncovered Interest Parity in Emerging Economies written by Tamat Sarmidi and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Handbook of Exchange Rates by : Jessica James
Download or read book Handbook of Exchange Rates written by Jessica James and published by John Wiley & Sons. This book was released on 2012-05-29 with total page 674 pages. Available in PDF, EPUB and Kindle. Book excerpt: Praise for Handbook of Exchange Rates “This book is remarkable. I expect it to become the anchor reference for people working in the foreign exchange field.” —Richard K. Lyons, Dean and Professor of Finance, Haas School of Business, University of California Berkeley “It is quite easily the most wide ranging treaty of expertise on the forex market I have ever come across. I will be keeping a copy close to my fingertips.” —Jim O’Neill, Chairman, Goldman Sachs Asset Management How should we evaluate the forecasting power of models? What are appropriate loss functions for major market participants? Is the exchange rate the only means of adjustment? Handbook of Exchange Rates answers these questions and many more, equipping readers with the relevant concepts and policies for working in today’s international economic climate. Featuring contributions written by leading specialists from the global financial arena, this handbook provides a collection of original ideas on foreign exchange (FX) rates in four succinct sections: • Overview introduces the history of the FX market and exchange rate regimes, discussing key instruments in the trading environment as well as macro and micro approaches to FX determination. • Exchange Rate Models and Methods focuses on forecasting exchange rates, featuring methodological contributions on the statistical methods for evaluating forecast performance, parity relationships, fair value models, and flow–based models. • FX Markets and Products outlines active currency management, currency hedging, hedge accounting; high frequency and algorithmic trading in FX; and FX strategy-based products. • FX Markets and Policy explores the current policies in place in global markets and presents a framework for analyzing financial crises. Throughout the book, topics are explored in-depth alongside their founding principles. Each chapter uses real-world examples from the financial industry and concludes with a summary that outlines key points and concepts. Handbook of Exchange Rates is an essential reference for fund managers and investors as well as practitioners and researchers working in finance, banking, business, and econometrics. The book also serves as a valuable supplement for courses on economics, business, and international finance at the upper-undergraduate and graduate levels.
