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1
Kohler, Daniel. "Betting against uncovered interest rate parity." kostenfrei, 2008. http://www.biblio.unisg.ch/www/edis.nsf/wwwDisplayIdentifier/3513.
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Moh, Young-Kyu. "Exchange rate dynamics in a continuous-time model of uncovered interest parity with central bank intervention." Connect to this title online, 2003. http://www.gbv.de/dms/zbw/557909902.pdf.
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Reddy, Desigan. "Factors of the term structure of sovereign yield spreads and the effect on the uncovered interest rate parity model for exchange rate prediction." Master's thesis, University of Cape Town, 2018. http://hdl.handle.net/11427/29691.
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Using a Principal Component Analysis (PCA) approach, we investigate the sovereign yield spread term structure of the BRICS economies against the U.S. We show that the term structure for these markets are primarily driven by three latent factors which can be classified as the spread level, slope and curvature factors. We further postulate that a country’s yield curve contains valuable information about its future economic state and as such the PCA derived spread factors, which are based on the differences between sovereign yield curves, encapsulates material macro-economic information between the countries. In light of this, we show that augmenting the traditional Uncovered Interest Rate Parity model (UIRP) with these factors improves the models predictive accuracy of exchange rate movements.
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Makauskas, Rytis. "Will the Asian countries buy up the United States? : Current account imbalances and the Uncovered Interest Rate Parity: Japan, China and the U.S. 1970-2008." Thesis, Internationella Handelshögskolan, Högskolan i Jönköping, IHH, Nationalekonomi, 2012. http://urn.kb.se/resolve?urn=urn:nbn:se:hj:diva-18470.
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This paper aims to explain the current account imbalances between the United States of America, Japan and China. According to theory, such imbalances should offset each other so that the international balance of payments account is zero. The study also tests the Uncovered Interest Rate Parity (UIP) theory for the same sample of countries. The focus is on the empirics of the topic, therefore time-series analysis is used. The results suggest that American current account deficit can indeed be explained by the surpluses of the Japanese and Chinese current accounts. Furthermore, the conclusion regarding the UIP is that it simply does not hold in the real world. Finally, the main implication of this study is that the Asian countries will eventually buy up American assets if the trend of imbalances continues.
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Macháček, Marek. "Analýza vývoje měnového kurzu na základě koncepce nekryté úrokové parity." Master's thesis, Vysoká škola ekonomická v Praze, 2017. http://www.nusl.cz/ntk/nusl-359731.
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The aim of this diploma thesis is based on the empirical analysis to identify the relationship between the exchange rate and the interest rates in selected countries and verify the validity of the uncovered interest rate parity. In the first part, the author deals with basic theoretical and exchange rate determinants from a fundamental analysis point of view, which attempts to explain the causality between these two variables. The actual analysis was performed at three levels on monthly time series from 2010 to 2016. Graphical analysis was selected as the first stage of the analysis, also including verification of the validity of the Fisher International Effect. Later, regression and vector autoregressive analysis followed. However, the conclusions of the individual empirical parts show that the exchange rate is determined by many factors, not only by the interest rate differential, as assumed the theory of uncovered interest rate parity. These results are also related to the low quality of the estimated models. Uncovered interest rate parity has been confirmed in very few cases, but none of the monitored currency pairs has been validated at all three levels of empirical analysis at the same time. The work offers valuable insight into the trend appreciation or depreciation of the exchange rates at the positive interest rate differential in the selected period.
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Dror, Marika. "Forecasting of exchange rates." Doctoral thesis, Vysoká škola ekonomická v Praze, 2010. http://www.nusl.cz/ntk/nusl-202335.
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The thesis investigates different exchange rate models and their forecasting performance. The work takes previous literature overview and summarize their findings. Despite the significant amount of papers which were done on the topic of exchange rate forecast, basically none of them cannot find an appropriate model which would outperform a forecast of a simple random walk in every horizon or for any currency pair. However, there are some positive findings in specific cases (e.g. for specific pair or for specific time horizon). The study provides up-to-date analysis of four exchange rates (USD/CZK, USD/ILS, USD/GBP and USD/EUR) for the period of time from January 2000 to August 2013 and analyse forecasting performance of seven exchange rate models (uncovered interest rate parity model, purchasing power parity model, monetary model, monetary model with error correction, Taylor rule model, hidden Markov model and ESTAR model). Although, the results are in advantage of Taylor rule model, especially for the exchange rate of USD/CZK, I cannot prove that the forecasting performance is significantly better than the random walk model. Except of the overall analysis, the work suppose instabilities in the time. Stock and Watson (2003) found that the forecast predictability is not stable over time. As a consequence, the econometric model can give us better forecast than random walk process at some period of time, however at other period, the forecasting ability can be worse than random walk. Based on Fluctuation test of Giacomini and Rossi (2010a) every model is analysed how the out-of-sample forecast ability changes over time.
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Van, Heerden Petrus Marthinus Stephanus. "The relationship between the forward– and the realized spot exchange rate in South Africa / Petrus Marthinus Stephanus van Heerden." Thesis, North-West University, 2010. http://hdl.handle.net/10394/4511.
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The inability to effectively hedge against unfavourable exchange rate movements, using the
current forward exchange rate as the only guideline, is a key inhibiting factor of international
trade. Market participants use the current forward exchange rate quoted in the market to make
decisions regarding future exchange rate changes. However, the current forward exchange rate
is not solely determined by the interaction of demand and supply, but is also a mechanistic
estimation, which is based on the current spot exchange rate and the carry cost of the
transaction. Results of various studies, including this study, demonstrated that the current
forward exchange rate differs substantially from the realized future spot exchange rate. This
phenomenon is known as the exchange rate puzzle.
This study contributes to the dynamics of modelling exchange rate theories by developing an
exchange rate model that has the ability to explain the realized future spot exchange rate and
the exchange rate puzzle. The exchange rate model is based only on current (time t) economic
fundamentals and includes an alternative approach of incorporating the impact of the interaction
of two international financial markets into the model. This study derived a unique exchange rate
model, which proves that the exchange rate puzzle is a pseudo problem. The pseudo problem
is based on the generally excepted fallacy that current non–stationary, level time series data
cannot be used to model exchange rate theories, because of the incorrect assumption that all
the available econometric methods yield statistically insignificant results due to spurious
regressions. Empirical evidence conclusively shows that using non–stationary, level time series
data of current economic fundamentals can statistically significantly explain the realized future
spot exchange rate and, therefore, that the exchange rate puzzle can be solved.
This model will give market participants in the foreign exchange market a better indication of
expected future exchange rates, which will considerably reduce the dependence on the
mechanistically derived forward points. The newly derived exchange rate model will also have an influence on the demand and supply of forward exchange, resulting in forward points that are
a more accurate prediction of the realized future exchange rate.Thesis (Ph.D. (Risk management))--North-West University, Potchefstroom Campus, 2011.
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Zhang, Yifei. "Zero Lower Bound and Uncovered Interest Parity – A Forecasting Perspective." Miami University / OhioLINK, 2018. http://rave.ohiolink.edu/etdc/view?acc_num=miami1532698263083492.
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Davies, Orlan. "The Uncovered Interest Rate Parity at the Turn of the 20th Century." Scholarship @ Claremont, 2013. http://scholarship.claremont.edu/cmc_theses/663.
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High interest rate currencies tend to appreciate despite what is be implied by the uncovered interest parity. It is thought that the uncovered interest parity does not hold due to various risks, costs, liquidity issues, and monetary policies. There have been extensive studies into the cause of this phenomenon yet none have examined the period before the formation of the Federal Reserve in 1913. This study examines whether or not the uncovered interest parity holds between the UK, the US, France, Germany, the Netherlands, Belgium, Italy, Spain, and Portugal during this time period to determine if the absence of capital controls and monetary policies allow for the uncovered interest parity to hold. In the end, none of the 213 regressions testing all the country pairs across varying horizons came close to providing support for the uncovered interest parity.
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Yuen, Wai-kee, and 袁偉基. "A historical event analysis of the variability in the empirical uncovered interest parity (UIP) coefficient." Thesis, The University of Hong Kong (Pokfulam, Hong Kong), 2006. http://hub.hku.hk/bib/B36424201.
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Berberoglu, Pinar. "The Validity Of The Relative Purchasing Power Parity And The Uncovered Interest Rate Parity Theories For The Dollar/euro Exchange Rate." Master's thesis, METU, 2004. http://etd.lib.metu.edu.tr/upload/2/12605635/index.pdf.
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This study analyzes validity of the relative purchasing power parity (PPP) and the uncovered interest rate parity (IRP) theories for the dollar/euro exchange rate. The period of analysis is from 1990 to 2003. The dollar/euro exchange rate represents the currencies of a country, the USA, and a region, the Euro Area. The basic data needed for this study are the dollar/euro exchange rate, and the inflation and the interest rates for the USA and the Euro Area. Since the Euro Area was officially formed on January 1st, 1999, we had difficulty in finding the data for the Euro Area. For the lacking Euro Area data, synthetic values are created by using the individual data of Euro Area countries. These synthetic values are treated as the equivalents of the actual values and are used in the parity implied dollar/euro exchange rate calculations. The parity implied dollar/euro exchange rates are compared with the actual dollar/euro exchange rates. Our results indicate that the parity implied dollar/euro exchange rates are statistically significantly different from the actual dollar/euro exchange rates. In other words, both the PPP and the IRP theories do not hold for the dollar/euro exchange rate.
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Tafazoli, Farid, and Mathias Westman. "Carry Trading & Uncovered Interest Rate Parity : An overview and empirical study of its applications." Thesis, Linköpings universitet, Företagsekonomi, 2011. http://urn.kb.se/resolve?urn=urn:nbn:se:liu:diva-70478.
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The thesis examine if the uncovered interest rate parity holds over a 10 year period between Japan and Australia/Norway/USA. The data is collected between February 2001 - December 2010 and is used to, through regression and correlation analysis, explain if the theory holds or not. In the thesis it is also included a simulated portfolio that shows how a carry trading strategy could have been exercised and proof is shown that you can indeed profit as an investor on this kind of trades with low risk. The thesis shows in the end that the theory of uncovered interest rate parity does not hold in the long term and that some opportunities for profits with low risk do exist.Uppsatsen undersöker om det icke kurssäkrade ränteparitetsvilkoret har hållit på en 10-års period mellan Japan och Australien/Norge/USA. Månadsdata från februari 2001 till december 2010 används för att genom regressionsanalys samt undersökning av korrelationer se om sambandet håller eller inte. I studien finns också en simulerad portfölj som visar hur en carry trading portfölj kan ha sett ut under den undersökta tidsperioden och hur man kan profitera på denna typ av handel med låg risk. Studien visar i slutet att teorin om det kursosäkrade ränteparitetsvilkoret inte håller i det långa loppet och att vissa möjligheter till vinst existerar.
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Brigant, Michal. "Analýza vztahu úrokové míry a měnového kurzu v podmínkách malé otevřené ekonomiky." Master's thesis, Vysoká škola ekonomická v Praze, 2012. http://www.nusl.cz/ntk/nusl-162302.
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Primary objective of this thesis was to analyse the relationship between exchange rate and interest rate within borders of a small open economy. Different theoretical approaches often present us with various, sometimes even opposing conclusions when it comes to the matter of direction and intensity of the causal influence between these two variables. From author's point of view it is important to perceive the interaction between exchange rate and interest rate as a dynamic process rather than a static relationship. The empirical analysis was conducted on monthly time series (2000-2012) of three selected small open economies -- Poland, Hungary and Czech Republic. Graphical analysis, linear regression, vector autoregression and cointegration analysis were selected as suitable tools for meeting the objective of this thesis. Models themselves presented us with interesting conclusions, for example a proof of the international Fisher effect, exchange rate causally affecting the interest rate (interest rate differential) in case of spot rates against euro. Another curious phenomena was the inflow of foreign debt capital, which, as it seems, was actually pulling the exchange rate down rather than pushing it up due to rising indebtedness of the economy.
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Unger, Julian. "A small open economy’s view on interest rate differential’s relation to the nominal exchange rate." Thesis, Linnéuniversitetet, Institutionen för nationalekonomi och statistik (NS), 2017. http://urn.kb.se/resolve?urn=urn:nbn:se:lnu:diva-65487.
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The characteristics of interest rate differentials’ relationships with the change in nominal exchange rates are here investigated from the small open economy Sweden’s pointof view. We assume rational expectations and risk neutrality. However, these are solelysufficient but not necessary conditions. The only necessary condition is that the deviationsfrom rational expectations and risk neutrality are uncorrelated with the interestrate differential (Chinn and Meredith 2004, p. 412). We find no evidence for the interestrate differentials to be unbiased predictors of the percentage change in nominalexchange rates. With 3- and 6-month maturity interest rates, the signs are positivealthough not statistically different from zero.
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Ruthberg, Richard, and Steven Zhao. "Interest Rate Parity and Monetary Integration: A Cointegration Analysis of Sweden and the EMU." Thesis, KTH, Matematik (Inst.), 2014. http://urn.kb.se/resolve?urn=urn:nbn:se:kth:diva-146277.
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This thesis provides a thorough analysis of the covered- and uncovered interest parity conditions (CIP, UIP) as well as the forward rate unbiasedness hypothesis (FRUH) for Sweden and the European Economic and Monetary Union (EMU). By studying data on interbank rates in Sweden (STIBOR) and the EMU (EURIBOR) as well as the corresponding spot- and forward exchange rates, monetary integration and country-specific risks are determined and analyzed with direct applications to the potential entry of Sweden into the EMU. As interest rate parity in general gives insight into market efficiency and frictions between the chosen regions, such points are discussed in addition to EMU entry. Drawing on past studies that mainly studied one condition in isolation, a nested formulation of interest rate parity is instead derived and tested using cointegration and robust estimation methods. The results point to a strict rejection of the FRUH for all horizons except the shortest and a case where CIP only holds for the 6-month horizon and partially over one year. This implies, based on the nested formulation, that UIP is rejected for all horizons as well. Ultimately, the study concludes that a Swedish entry into the EMU is not motivated given the lackluster results on UIP and due to the lack of monetary integration.Den här uppsatsen presenterar en djupgående analys av det kurssäkrade- och icke-kurssäkrade ränteparitetsvillkoret samt den effektiva marknadshypotesen på valutaterminer för Sverige och den europeiska ekonomiska och monetära unionen (EMU). Genom att studera data på interbankräntor i Sverige (STIBOR) och EMU (EURIBOR) samt respektive spot- och valutaterminskurser så skattas och analyseras monetär integration samt landsspecifika risker med en direkt tillämpning på Sveriges eventuella inträde i EMU. Eftersom ränteparitet generellt ger insikt i marknadseffektivitet och friktioner regioner emellan, diskuteras även dessa punkter utöver ett eventuellt EMU-inträde. Genom att bygga på föregående studier som i huvudsak studerar ränteparitetsvillkoren var för sig, härleds en sekventiell formulering av villkoren som sedan testas med kointegration och robusta estimeringsmetoder. Resultaten ger att den effektiva marknadshypotesen strikt förkastas på alla tidshorisonter förutom på en dag respektive en vecka, samt att kurssäkrad ränteparitet håller på 6 och delvis 12 månaders sikt. Baserat på den sekventiella formuleringen så innebär detta att icke-kurssäkrad ränteparitet inte håller på någon tidshorisont. Slutligen, baserat på både resultat och diskussion, är ett svenskt inträde i EMU inte motiverbart givet negativa resultat för icke-kurssäkrad ränteparitet och avsaknaden av fullständig monetär integration mellan regionerna.
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Sadykova, Albina. "Carry trade a jeho projevy na finančních trzích." Master's thesis, Vysoká škola ekonomická v Praze, 2013. http://www.nusl.cz/ntk/nusl-192635.
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This thesis concerns with speculative carry trade strategy. Carry trade is based on breach of Uncovered Interest Parity. The theoretical part is focused on traditional fundamental analysis. This thesis deals with the identification of carry trade existence and capture their expressions in the financial markets, verification profitability and attractiveness of carry trade operations, analysis of conditions for carry trade on financial markets before and after global financial crisis 2008. Important part of the work was also description of the consequences of carry trade transactions and their effects on the exchange rate and financial situation
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Rabitsch, Katrin. "An Incomplete Markets Explanation to the UIP Puzzle." WU Vienna University of Economics and Business, 2014. http://epub.wu.ac.at/4109/1/wp171.pdf.
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A large literature has related the failure of interest rate parity in the foreign exchange market to the existence of a time-varying risk premium. Nevertheless, most modern open economy DSGE models imply a (near) perfect interest rate parity condition. This paper presents a stylized two-country incomplete-markets model in which countries have
strong precautionary motives because they face international liquidity constraints, the presence of which successfully generates a time-varying risk premium: the country that has accumulated debt after experiencing relative worse times has stronger precautionary
motives and its asset carries a risk premium. (author's abstract)Series: Department of Economics Working Paper Series
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Ersan, Eda. "International Fisher Effect: A Reexamination Within Co-integration And Dsue Frameworks." Thesis, METU, 2008. http://etd.lib.metu.edu.tr/upload/12610157/index.pdf.
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International Fisher Effect (IFE) is a theory in international finance which asserts that the spot exchange rate between countries should move in opposite direction with the interest rate differential between these countries. The aim of this thesis is to analyze whether differences in nominal interest rates between countries and the movement of spot exchange rates between their currencies tend to move together over the long run. The presence of IFE is tested among the G-5 countries and Turkey for the period from 1985:1 to 2007:12. The long run relationship is estimated with the Johansen co-integration method and supportive evidence is found for all country pairs. Individually modeled equations are further tested with the Dynamic SUR method. Those DSUR equations that include the Turkish currency provide supportive evidence for IFE that higher interest rates in favor of Turkey would cause depreciation of the Turkish Lira. The magnitude of the effect is found to be lower than expected which indicates that there might be other factors in economy, such as inflation rates, that affect the exchange rate movements.
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Baskurt, Ozge. "Financial Dollarization And Currency Substitution In Turkey." Master's thesis, METU, 2005. http://etd.lib.metu.edu.tr/upload/12606172/index.pdf.
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This study aims to investigate currency substitution and financial dollarization in Turkey. The extend of dollarization in Turkey appears to be very high according to both the conventional currency substitution and the recently developed financial dollarization measures. This has serious policy implications as a source of financial fragility through currency/maturity mismatches and balance sheet effects. The empirical part of this study contained an investigation of the long run relationships between the variables in a system containing currency substitution ratio, expected exchange rate change and rates of return on domestic and foreign currency denominated assets. The results of the Johansen cointegration analysis based on quarterly data for the 1987-2004 period appeared not to be strongly supporting the General Portfolio Balance Model (GPBM). The theoretical part of this study suggests that the GPBM can be reduced to the Sequential Portfolio Balance Model (SPBM) under the uncovered interest parity (UIP) hypothesis. Consequently, the GPBM may be misleading under UIP. The Johansen cointegration results suggested the validity of the UIP for the Turkish data. The estimation of the SPBM suggested that there is a long-run relationship between currency substitution and expected exchange rate change in Turkey. The elasticity of currency substitution appeared to be high but consistent with those estimated for other high inflation developing countries. The results further supported the presence of a ratchet/hysteresis effect proxied by a trend variable. All these results are consistent with the argument that currency substitution and financial dollarization are important especially in high inflation countries.
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Costa, Marisa Gomes da. "Fatores determinantes do nível do risco Brasil." Universidade Presbiteriana Mackenzie, 2016. http://tede.mackenzie.br/jspui/handle/tede/977.
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Previous issue date: 2016-02-01This study aims to identify the determinants of Brazil country risk level, during the period from February 1995 to August 2015, based on the deviations from the covered interest rate parity condition. These deviations represent a measure of the risk assumed by an investor who choose to invest in a Brazilian security in Brazil, rather than do it abroad. Using Autometrics, an algorithm for automatic model selection, developed by Doornik (2009), thirty-nine explanatories variables were selected from previous studies. The Brazil country risk level is susceptible to changes in the balance of payments, import by GDP, the deviation covered interest rate parity of the previous period, the inflation rate, the change in exports, total debt per GDP, and external debt by exports.
Este estudo propõe-se a identificar os fatores determinantes do nível do risco Brasil, durante o período de fevereiro de 1995 a agosto de 2015, calculado pelos desvios da condição da paridade coberta de juros. Estes desvios representam a medida do risco assumido por um investidor ao optar investir em um título brasileiro no Brasil, ao invés de fazê-lo no exterior. Utilizando a técnica de seleção automática de modelos com a aplicação do algoritmo Autometrics, desenvolvido por Doornik (2009), trinta e nove variáveis explicativas foram selecionadas a partir de estudos anteriores. O nível do risco Brasil é altamente suscetível às variações do balanço de pagamento, da importação por PIB, do desvio da condição da paridade coberta do período anterior, à taxa de inflação, à variação das exportações (em $ e em volume), à dívida total por PIB e à dívida externa pela exportação.
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Melander, Ola. "Empirical essays on macro-financial linkages." Doctoral thesis, Stockholm : Economic Research Institute, Stockholm School of Economics (EFI), 2009. http://www2.hhs.se/efi/summary/790.htm.
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Wu, Hsin-Hung, and 吳信宏. "Uncovered Interest Rate Parity in a Time-Varying Smooth Transition Regression Model." Thesis, 2008. http://ndltd.ncl.edu.tw/handle/07957192508227530032.
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碩士國立高雄大學
經濟管理研究所
96
There are general findings by many studies criticizing that the linear model proposed by Fama (1984) is unable to validate uncovered interest parity (UIP) hypothesis. Therefore, some scholars presented theoretical motivation, e.g. , the presence of transaction cost (Sercu and Wu, 1992), the limitations to speculation hypothesis (Lyons, 2001) and the behavior of interventions (Mark and Moh, 2007). Baillie and Bollerslev (2000) also show that the magnitude and sigh of the estimated slop coefficient in the forward premium regression appears to be slowly time-varying. The paper applies the time-varying smooth transition regression model proposed by Lundbergh, Teräsvirta and van Dijk (2003) to describe and distinguish nonlinearity and structural change (time-varying coefficients) simultaneously in modeling the monthly observations of US spot and 1-month forward exchange rate against the UK sterling and Canadaian dollar and Japanese Yen. The main finding of this research is that the nonlinear relationship is supported empirically. The UIP is not rejected all the time, and it can be justified from the dynamics of regime switching caused by time-variation and the behavior of speculation. But the limitation of setting the maximum endogenous breakpoint may not find out all possible structural breaks.
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Wu, Li-Fen, and 吳麗芬. "Uncovered Interest Rate Parity Test:The case for Taiwan." Thesis, 2007. http://ndltd.ncl.edu.tw/handle/5se4v7.
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碩士銘傳大學
國際企業學系碩士在職專班
95
The Uncovered Interest Parity﹙UIP﹚has been rejected in most of empirical studies﹐In this paper﹐we examine the Uncovered Interest Parity﹙UIP﹚in Taiwan with Gemeralized Method of Moments﹙GMM﹚provided by Hansen﹙1982﹚and this paper use of long–horizon forward exchange rate to identify UIP﹒ The results reveal that estimate method of exploitation GMM as a result to overcome the problems of overlapping data﹒And we find that UIP can not be accepted at the short and long horizon﹒
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Chuang, Jing-shun, and 莊景舜. "Uncovered Interest Rate Parity Test Based on Rational Expectation." Thesis, 2012. http://ndltd.ncl.edu.tw/handle/30735598162482341316.
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碩士南華大學
管理經濟學系經濟學碩士班
100
This paper carries out an empirical investigation of uncovered interest rate parity (UIP) model, which incorporates the rational expectations methodology. We use the Taiwan dollars (NTD) as the home currency, and the Japanese yen (JPY), Singapore dollar (SGD), Hong Kong dollars (HKD), Australian dollar (AUD), U.S. dollar (USD), Canadian dollar (CAD), British pound (GBP), Swiss franc (CHF) and Swedish krona (SEK) as the foreign currency. The data of exchange rates and interest rates(one- and three-month time deposits) are obtained from the Taiwan Bank’s website. We use daily data over the period from 01, January, 2011 to 10, July, 2012. We use ADF, PP and KPSS to test the stabilities of the expected rate of depreciation of the home currency against the foreign currency and the interest differential. We use the so-called Fama regression to evaluate the effect of interest differential on the expected rate of depreciation and to test whether the UIP holds. Our finding is that the uncovered interest rate parity does not hold based on rational expectation. This means that arbitrage space still exists between Taiwan and international finance markets.
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TSAI, YU-HUNG, and 蔡楀鴻. "Uncovered interest parity and exchange rate volatility in Taiwan." Thesis, 2016. http://ndltd.ncl.edu.tw/handle/64034262801784457185.
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碩士國立臺北大學
經濟學系
104
We investigated uncovered interest rate parity using Taiwanese dollar against foreign currencies. We found the uncovered interest rate parity is not hold in Taiwanese dollar exchange rate as literature suggested. Next, the exchange rate volatility shows impact on the uncovered interest rate parity estimation results. We also studies the Markov regime switching models and the results are mixed about the relationship of exchange rate volatility and the uncovered interest rate parity.
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Machobani, Dennis. "Testing for the uncovered interest parity hypothesis in South Africa." Thesis, 2016. http://hdl.handle.net/10539/21494.
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Research Report: BUSA7167 (MM Finance and Investment Management).
Submitted in Partial Fulfillment of the Requirements for the
(Master of Management in Finance and Investments).
Submitted on 06th June 2016The findings of the research have implications on the efficiency of the South African exchange rate market, and by extension, the efficiency of similar emerging foreign exchange markets. The study used Ordinary Least Square Approach and Johansen cointegration. Despite their theoretical appeal, and in line with a dozen of related past literature, the findings of the research generally favour the rejection UIP, PPP and IFE. The findings have implications on some regulatory measures that can be undertaken by the financial authority to improve the efficiency of the foreign exchange market. While there have been extensive studies on uncovered interest parity (UIP), purchasing power parity(PPP), and the international Fisher effect(IFE), research has scarcely tested these hypotheses in the context of emerging markets. This study attempts to bridge the existing gap by testing the three related parity condition for South Africa.
MT2016
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"An empirical analysis of uncovered interest parity at short and long horizons." 2001. http://library.cuhk.edu.hk/record=b5890699.
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Zhang Haiyan.Thesis (M.Phil.)--Chinese University of Hong Kong, 2001.
Includes bibliographical references (leaves 48-50).
Abstracts in English and Chinese.
Chapter 1 --- Introduction --- p.1
Chapter 2 --- Literature Review --- p.6
Chapter 2.1 --- An Introduction to the Uncovered Interest Parity (UIP) and previous works on UIP --- p.6
Chapter 2.2 --- Previous empirical works applying Band Spectrum Regression(BSR) --- p.15
Chapter 3 --- Basic Band Spectral Regression (BSR) Techniques --- p.20
Chapter 3.1 --- BSR Based on the complex Fourier transform --- p.20
Chapter 3.2 --- BSR based on the real-valued Fourier transform --- p.24
Chapter 3.3 --- Testing for parameter stability in the frequency domain --- p.26
Chapter 4 --- Data and Standard Time Series Analysis in the Time Domain --- p.29
Chapter 5 --- Analyze the UIP relation in the frequency domain --- p.33
Chapter 5.1 --- An overview of the UIP relation across frequency --- p.33
Chapter 5.2 --- Testing parameter stability across different time horizons --- p.37
Chapter 6 --- Test of UIP with the forward premium --- p.42
Chapter 7 --- Conclusion --- p.45
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Lu, Chih-Tien, and 盧志典. "Uncovered interest parity of non-linear smooth transitional threshold model in Netherlands." Thesis, 2009. http://ndltd.ncl.edu.tw/handle/79985029624635387881.
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碩士淡江大學
財務金融學系碩士班
97
The majority of researches have adopted general linear regression model to examine uncoverd interest parity (UIP) and the outcomes did not support the UIP theory in most studies. Recently, the application of non-linear regression model increases substantially. Most evidences of exchange rate analysis show that the adjustment of parameter on exchange rate model is smooth transition not jump pattern. Hence, this study use non-linear smooth transitional threshold model to examine uncoverd interest parity (UIP) in the Netherlands (Holland). Our results show that the adjustment of interest spread in the Netherlands is logistic transition, which means that time series data is modulated by non-linearly. Moreover, the result also indicate that the transition is highly frequency and with double thresholds. Besides, this study examines the UIP in different intervals of in- and out-threshold samples. We find that the UIP theory is hold on out-threshold samples in January, 1985 to June and March, 1995 to December, 1996 ,because G5 intervention foreign exchange in Plaza Accord and Europe unite the relaxation foreign exchange fluctuation scope but is not on in-threshold samples.
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WeiChao and 趙薇. "The Uncovered Interest Rate Parity Theory and Sovereign CDS Premiums-the Case of East Asian Countries." Thesis, 2018. http://ndltd.ncl.edu.tw/handle/zbdw34.
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Wu, Lin-Shun, and 吳林順. "The Analysis of International Asset Pricing Model and Uncovered Interest Parity Model--A signal extraction exercise." Thesis, 2006. http://ndltd.ncl.edu.tw/handle/31268068085677266699.
Full textAbstract:
碩士國立中央大學
產業經濟研究所
94
Substantial empirical literature has rejected the ‘simple efficiency’ hypothesis of the foreign exchange market, i.e. the joint hypothesis that combines a zero risk premium and market efficiency. This rejection does not necessarily imply that the market operates inefficiently. A recognized alternative hypothesis is that a risk premium exists, although inefficiency is certainly an alternative hypothesis. The purpose of this paper is to conduct a race between models in terms of their ability to explain observed violations of uncovered interest parity. The analysis conducted in this paper was motivated by an attempt to identify the importance of risk premiums in explaining violations of uncovered interest parity—a ‘simple efficiency’ hypothesis which assumes risk neutrality and efficiency in the foreign exchange market. This is done by comparing the empirical performance of the ‘simple efficiency’ hypothesis and two types of models which assume the existence of risk premiums—one is implied by the consumption CAPM (of which type this paper suggests three examples), and the other is the HH model, which is implied by the beta CAPM. This paper further uses the hypotheses which assume that people have the same risk-aversion attitude to different countries. The relative empirical performance of each model is assessed using a noise ratio criterion, whose advantage over the J-statistic is that it provides clear insight into which specification is better reconciled with the data among various specifications. No matter people have the same risk-aversion attitude to different countries, the conclusion of this empirical work is that the Epstein-Zin model is more useful than the other consumption CAPMs and the Hansen-Hodrick latent variable model because it best approximates the observed interest rate and foreign exchange rate relationships. The noise ratio of the Epstein-Zin model is about quarter that of the simple efficiency. This implies that the significant components of the repeated rejections of uncovered interest parity could be removed by the risk premiums introduced by the Epstein-Zin model. The other two consumption CAPMs and the HH model are much less successful than the Epstein-Zin model in general.
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Huang, Tzu-i., and 黃慈乙. "A reexamination on interest rate parity using Cox-Ingersoll-Ross model." Thesis, 2008. http://ndltd.ncl.edu.tw/handle/69893730819148194147.
Full textAbstract:
碩士國立成功大學
財務金融研究所
96
In the field of international finance, uncovered interest rate parity (UIRP) and covered interest rate parity (CIRP) are the important foundation. The previous studies have shown the existence of CIRP. However, UIRP is not held except utilizing data on the long-term interest rate. As a result, our paper considers the dynamic process of interest rates and utilizes the new regression which adds a new factor, convexity, to reexamine UIRP and CIRP. In our conclusion, we still find CIRP holds but UIRP is not in this paper. However, the slope coefficient from the linear function of the change in the foreign exchange rate on the interest rate differential is positive in the test of UIRP. It is different from the previous results documented in finance literature, and then we can find the slope coefficient of the CIR model is closer to one than the traditional model. As a result, even if the R2 of the CIR model is worse than the traditional model, we can claim that the method which utilizes the dynamic process of interest rates to reexamine UIRP is superior to the traditional one.
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Tang, Tsu-Yin, and 唐祖蔭. "The Real Interest Rate Parity and Related Model Comparison in Asia Countries." Thesis, 1999. http://ndltd.ncl.edu.tw/handle/01268387823692447566.
Full textAbstract:
碩士國立臺灣大學
財務金融學研究所
87
In the past, the test of Fisher Effect Hypothesis focused on the equality of the real interest rate among countries. That is, to test the Interest Rate Parity(IRP) and the Purchase Power Parity(PPP). This paper focuses on the two factors of real interest rate: nominal interest rate and inflation, and their long-term relationship. Using lately-developed statistics methods to test the stationary and cointegration between two variables, and to construct the Error Correct Model(ECM). Then, compare to the GARCH Model, we can know which model has more predictability during the Asian-Pacific Financial Crisis. The sample period is from Jan. 1983 to Mar. 1999. We analyzed the long-term relationship between risk-free or money market rate and the year-added CPI rate among Japan, South Korea, Indonesia, Malaysia, Singapore, Philippines, Taiwan and Thailand, all of their data were deducted by US contemporary data. It shows that the data of Taiwan and Thailand, both interest rate and CPI, are all stationary. In the cointegration test, Japan exists zero rank, other five countries have long-term relationship. As for the models'' predictability comparison, the ECM has better performance than GARCH, though it''s prior error doesn''t contribute too much adjustment to the next. The GARCH Model has poor predictability, even during the violent period.
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LiuZhongYuan and 劉鍾元. "The prediction of short-run exchange rate on the basis of modified interest parity model." Thesis, 2015. http://ndltd.ncl.edu.tw/handle/89300181101040516234.
Full textAbstract:
碩士輔仁大學
經濟學系碩士班
103
In this article, I use the Risk Premium to correct the interest rate parity model, and use it to predict the short-run exchange rate. The main aim of this article is offer another method which is reliable and simple for common investors to use. First, I make the Unit Root Test to the exchange rate and interest rate spreads between major industry countries. The result indicates that all the exchange rates are I(1) and all the interest rate spreads are I(0). It means the variation of exchange rates is I(0), all of my variables are stationary. Then I derived the structure model and make the estimation and prediction by rolling regression, compared with the random walk model without drift. Our results indicate that Risk Premium played the main role in prediction. The effect of news is not very obvious but still could improve the prediction of our structure model, especially in our subsamples. When I divide the sample into two subsamples by Subprime Crisis, I get a better result that the structure model could beat the random work model for all the exchange rates.
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Huang, Yi Feng, and 黃怡鳳. "Real Interest Parity, Real Exchang Rate and Risk Premium—An Application of GARCH-M model." Thesis, 2015. http://ndltd.ncl.edu.tw/handle/9j98c2.
Full textAbstract:
碩士明新科技大學
管理研究所
103
This paper is analyzed for six countries（United Kingdom、France、Germany、Italy、Canada、Japan）relative to USA that what is ppp not established and risk premium will be influence real interest rate parity factor？this paper is used GARCH-M and GMM model to explore the issues. we confirmed in the U.S., UK, France, Germany, Italy, Canada, Japan countries in the real interest rate parity is not established for the PPP does not hold. in addition, the risk premium in the UK and Germany is another important factor in the real interest rate parity does not hold.
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Wei-JiaHuang and 黃韋嘉. "Reexamination of Interest rate parity with Vasicek model in the aftermath of global financial crisis." Thesis, 2018. http://ndltd.ncl.edu.tw/handle/5j2d98.
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Tsai, Chung-Heng, and 蔡仲恆. "Study on feasibility of carry trade - Validation of interest rate parity based on the smooth transition autoregressive model." Thesis, 2010. http://ndltd.ncl.edu.tw/handle/79144449008731123585.
Full textAbstract:
碩士國立臺灣大學
國際企業學研究所
98
This empirical study of Covered Interest Rate Parity (CIRP) is conducted on the basis of non-linear Smooth Transition Autoregressive Model, focusing on five areas including Japan, the United States, Australia, the United Kingdom, and the Euro zone. When CIRP holds, no abnormal gain can be derived from carry trade; in contrast, when CIRP cannot be supported, capital holders can obtain abnormal profit from carry trade. The result demonstrates that a linear relationship exists in the difference (D) between interest spread and forward exchange rate discount (or premium) of the Euro zone and Japan. In the cases of Australia against Japan and the UK against Japan, STAR model can be used to describe the process of adjustment for D`s deviation. While the high speed of transition (γ) of the United States against Japan causes STAR model to recede to TAR model. These three non-linear models possess excellent predictive power, according to the root mean square error. In the forecasted periods, CIRPs of the United States against Japan and the UK against Japan sustain in nearly all periods, suggesting the financial markets and the foreign exchange markets are efficient. Therefore, capital holders cannot obtain abnormal profit from carry trade. In the case of Australia against Japan, CIRP can be supported only in the initial periods. Then it gradually deviates from CIPR equilibrium in the long term, causing inefficiency of the financial markets and the foreign exchange markets. Hence, investors can obtain abnormal profit from carry trade.
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Tshehla, Makgopa Freddy. "An empirical study of the exchange rate volatility regime for carry trade investors." Thesis, 2014. http://hdl.handle.net/10500/14153.
Full textAbstract:
The main objective of the study was to determine the exchange rate volatility regime for carry trade profitability when using the South African Rand as the target currency.
The study used the Logistic Smooth Transition Regression (LSTR) model to test the uncovered interest rate parity (UIP). The Sharpe ratio and the risk adjusted forward premium were used as the transition variables. The transition variable is a function of the transition function, which is used to determine the regime for the UIP. The LSTR model is characterised by three regimes, i.e. the lower regime, the middle regime and the upper regime. The LSTR model was tested for the short-term forward rate maturity of less than one year.
The results show that the UIP hypothesis holds in the middle regime for the Rand/USD and the Rand/GBP when using the Sharpe ratio as the transition variable. Meanwhile, the UIP hypothesis does not hold for the Rand/Yen when using the Sharpe ratio as the transition variable for the forward rate maturity of one month, and it does hold for other short-term forward rate maturity of less than one year. The results for the risk adjusted forward premium as the transition variable show that the UIP hypothesis does not hold for all three currencies at various short-term forward rate maturities of less than one year.
The research provides the following contributions to new knowledge:
(1) Uncovered interest parity hypothesis holds in the middle regime for all periods for the Rand/USD and the Rand/GBP when using the Sharpe ratio as the transition variable with a short-term forward rate maturity of less than one year.
(2) Currency carry trade profit taking for the Rand/USD and the Rand/GBP can be achieved in the upper regime.
(3) The results for the Rand/Yen are mixed, in that the UIP hypothesis does not hold for other crisis periods as a result of negative Sharpe ratios. However, for the calm periods, UIP hypothesis holds in the middle regime for the Rand/Yen for short-term forward rate maturity of more than one month but less than one year when using the Sharpe ratio as the transition variable.
The overall contribution of this study is that for the South African Rand as the target currency, the UIP hypothesis holds for the short-term horizon when using the Sharpe ratio as the transition variable and that this mostly depends more on currency than on horizon.
Contrary to other researchers who found that the UIP holds in the long-term maturity with higher Sharpe ratios in the upper regime, this study proved that the UIP holds in the short-term maturity horizon.Business Management
D.B.L.