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Testing Uncovered Interest Parity At Short And Long Horizons During The Post Bretton Woods Era
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Book Synopsis Testing Uncovered Interest Parity at Short and Long Horizons During the Post-Bretton Woods Era by : Menzie David Chinn
Download or read book Testing Uncovered Interest Parity at Short and Long Horizons During the Post-Bretton Woods Era written by Menzie David Chinn and published by . This book was released on 2005 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The hypothesis that interest rate differentials are unbiased predictors of future exchange rate movements has been almost universally rejected in empirical studies. In contrast to previous studies, which have used short-horizon data, we test this hypothesis using interest rates on longer-maturity bonds for the U.S., Germany, Japan and Canada. The results of these long-horizon regressions are much more positive--the coefficients on interest differentials are of the correct sign, and most are closer to the predicted value of unity than to zero. These results are robust to the use of different data frequencies, sample periods, yield definitions, and base currencies. We appeal to an econometric interpretation of the results, which focuses on the presence of simultaneity in a cointegration framework"--National Bureau of Economic Research web site.
Book Synopsis Testing Uncovered Interest Parity at Short and Lomg Horizons During the Post-Bretton Woods Era by : Menzie David Chinn
Download or read book Testing Uncovered Interest Parity at Short and Lomg Horizons During the Post-Bretton Woods Era written by Menzie David Chinn and published by . This book was released on 2005 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Testing Uncovered Interest Parity at Short and Long Horizons by : Menzie David Chinn
Download or read book Testing Uncovered Interest Parity at Short and Long Horizons written by Menzie David Chinn and published by . This book was released on 2000 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Long-horizon Uncovered Interest Rate Parity by : Guy Meredith
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.
Book Synopsis Testing Uncovered Interest Parity by : Antonio Diez de los Rios
Download or read book Testing Uncovered Interest Parity written by Antonio Diez de los Rios and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Nowadays researchers can choose the sampling frequency of exchange rates and interest rates. If the degree of overlap is large relative to the sample size, standard GMM asymptotic theory provides unreliable inferences in uncovered interest parity (UIP) regression tests. We specify a continuous-time model for exchange rates and forward premia robust to temporal aggregation, unlike existing discrete-time models. We test the UIP restrictions on the continuous-time model parameters and propose a novel specification test that compares estimators at different frequencies. Our results based on correctly specified models provide little support for UIP at both short and long horizons.
Book Synopsis Long Horizon Uncovered Interest Parity Re-Assessed by : Menzie David Chinn
Download or read book Long Horizon Uncovered Interest Parity Re-Assessed written by Menzie David Chinn and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We review the evidence for both short and long horizon uncovered interest parity (UIP) and rational expectations over the period up to 2011, extending the sample examined in Chinn and Meredith (2004) by nearly a decade. We find that the joint hypothesis of UIP and rational expectations (known as the unbiasedness hypothesis) holds better at long horizons than at short, although the effect is somewhat weaker than documented in Chinn and Meredith (2004). Using the formula for the slope coefficient, we identify potential sources for the difference in slope coefficients at different horizons. We attribute our weaker findings for long horizon unbiasedness for certain currencies partly to the advent of extraordinarily low interest rates associated with the zero interest bound in Japan and Switzerland.
Book Synopsis Uncovered Interest Parity by : Peter Isard
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.
Book Synopsis Uncovered Interest Parity by : Alain P. Chaboud
Download or read book Uncovered Interest Parity written by Alain P. Chaboud and published by . This book was released on 2003 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A Research Examination of Covered-Uncovered Interest Rate Parity and the Purchase Power Parity (PPP) Hypothesis: Applications in MATLAB, RATS and EVIEWS by : Eleftherios Giovanis
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
Book Synopsis Uncovered Interest Parity by : Mr.Peter Isard
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.
Book Synopsis An Empirical Analysis of Uncovered Interest Parity at Short and Long Horizons by : Haiyan Zhang
Download or read book An Empirical Analysis of Uncovered Interest Parity at Short and Long Horizons written by Haiyan Zhang and published by . This book was released on 2001 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 Long-horizon uncovered interest parity by : Guy Meredith
Download or read book Long-horizon uncovered interest parity written by Guy Meredith and published by . This book was released on 1999 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Uncovered Interest Parity Tests and Exchange Rate Expectations by : Philip S. Marey
Download or read book Uncovered Interest Parity Tests and Exchange Rate Expectations written by Philip S. Marey and published by . This book was released on 2004 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Uncovered Interest Rate Parity Over the Past Two Centuries by : James R. Lothian
Download or read book Uncovered Interest Rate Parity Over the Past Two Centuries written by James R. Lothian and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Uncovered interest rate parity (UIP) is one of three key theoretical relations used in analytical work in both international finance and international monetary economics. The problem, however, is that UIP does not seem to hold up well empirically. In this paper, we argue that the failures of UIP that have been so widely documented are a coincidence of two empirical artifacts: (1) the unique sample period of the 1980s and (2) The noise induced by small UIP deviations. We control for these empirical artifacts by constructing an ultra long time series that spans two centuries and by running regressions conditional on large deviations from UIP. We find that traditional regressions yield positive slope estimates over the whole sample period and become negative only when the sample is dominated by the period of 1980s. We argue that the negative estimates during this sample period are mainly the result of a failure of expectations to adjust quickly to the regime changes in monetary policy that took place in both the United Kingdom and the United States. We also find that large interest rate differentials have significantly stronger forecasting powers for currency movements than small interest rate differentials. Finally, a historical account of expected and realized regime changes further illustrates how the expectation hypothesis holds over the very long haul but can be deviated from for a long period of time due to slow adjustment of expectations to actual regime changes or to anticipations for extended periods of regime changes or other big events that never materialize.
Book Synopsis Uncovering Uncovered Interest Parity During the Classical Gold Standard Era,1888-1905 by : Andrew Michael Guy Coleman
Download or read book Uncovering Uncovered Interest Parity During the Classical Gold Standard Era,1888-1905 written by Andrew Michael Guy Coleman and published by . This book was released on 2010 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Deviations from Uncovered Interest Parity by : Evan Tanner
Download or read book Deviations from Uncovered Interest Parity written by Evan Tanner and published by . This book was released on 2006 with total page 24 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 quot;where the action is.quot; 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.
