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Journal articles on the topic 'Uncovered interest rate parity model'

Author: Grafiati

Published: 4 June 2021

Last updated: 10 February 2022

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1

Mladenovic, Zorica, and Jelena Raskovic. "Econometric testing of uncovered interest rate parity in Serbia." Ekonomski anali 63, no. 216 (2018): 35–61. http://dx.doi.org/10.2298/eka1816035m.

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This paper provides econometric evidence of the interest parity puzzle in Serbia over the period 2005-2016. Econometric findings are derived from the following techniques: long-run parameter estimation based on the autoregressive distributed lag model, impulse response function computed from the bivariate vector autoregressive model, and estimation of the two-regime Markov switching parameter model. Our results indicate that a positive interest differential corrected for country risk leads to significant dinar appreciation against the euro. The intensity of this impact is different across sub-periods of low exchange rate variability and high variability. Exchange rate movements are found to appreciate more strongly during lower variability episodes. Preliminary econometric investigation of four other European emerging economies documents similar findings only for Romania. Our results suggest that there is a huge incentive for shortterm carry trades in Serbia, regardless of substantial risks.

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2

Ilut, Cosmin. "Ambiguity Aversion: Implications for the Uncovered Interest Rate Parity Puzzle." American Economic Journal: Macroeconomics 4, no. 3 (July 1, 2012): 33–65. http://dx.doi.org/10.1257/mac.4.3.33.

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High interest rate currencies tend to appreciate in the future relative to low interest rate currencies instead of depreciating as uncovered interest parity (UIP) predicts. I construct a model of exchange rate determination in which ambiguity-averse agents face a dynamic filtering problem featuring signals of uncertain precision. Solving a max-min problem, agents act upon a worst-case signal precision and systematically underestimate the hidden state that controls payoffs. Thus, on average, agents next periods perceive positive innovations, which generates an upward re-evaluation of the strategy's profitability and implies ex post departures from UIP. The model also produces predictable expectational errors, negative skewness, and time-series momentum for currency speculation payoffs. (JEL D81, F31, G15)

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3

Durčáková, Jaroslava, Martin Mandel, and Vladimír Tomšík. "Dynamic model of uncovered interest rate parity (theory and empirical verification in the transitive economies)." Politická ekonomie 53, no. 3 (June 1, 2005): 291–303. http://dx.doi.org/10.18267/j.polek.506.

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4

Engel, Charles. "Exchange Rates, Interest Rates, and the Risk Premium." American Economic Review 106, no. 2 (February 1, 2016): 436–74. http://dx.doi.org/10.1257/aer.20121365.

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The uncovered interest parity puzzle concerns the empirical regularity that high interest rate countries tend to have high expected returns on short term deposits. A separate puzzle is that high real interest rate countries tend to have currencies that are stronger than can be accounted for by the path of expected real interest differentials under uncovered interest parity. These two findings have apparently contradictory implications for the relationship of the foreign-exchange risk premium and interest-rate differentials. We document these puzzles, and show that existing models appear unable to account for both. A model that might reconcile the findings is discussed. (JEL E43, F31, G15)

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5

Kanchanapoom, Termkiat, Chaiyuth Padungsaksawasdi, Pornchai Chunhachinda, and Maria E. de Boyrie. "Uncovered Interest Rate Parity, Carry Trade, and Country Equity Return Differentials." Global Economy Journal 18, no. 3 (June 30, 2018): 20180041. http://dx.doi.org/10.1515/gej-2018-0041.

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This paper applies a mixed effect model to investigate the relationship between international equity returns and forward discount sorted currency returns from three base currencies (i. e., US dollar, euro, and pound sterling). Empirical results using the portfolio approach show that high-interest rate currencies co-move positively while low-interest rate currencies co-move negatively, suggesting that foreign equity excess returns can help to explain investment in currency markets, providing a partial resolution to the uncovered interest parity conundrum. Furthermore, we show that global equity market returns, volatility, and liquidity correlate well with currency returns.

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6

Hsing, Yu. "Exchange rate fluctuations in Croatia: test of uncovered interest rate parity and the open economy model." Applied Economics Letters 14, no. 11 (September 2007): 785–88. http://dx.doi.org/10.1080/13504850600689980.

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7

Taylor, L. "Exchange rate indeterminacy in portfolio balance, Mundell-Fleming and uncovered interest rate parity models." Cambridge Journal of Economics 28, no. 2 (February 18, 2004): 205–27. http://dx.doi.org/10.1093/cje/28.2.205.

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8

Yoon, Jong Cheol, Dai Hong Min, and Sang Young Jei. "Purchasing power parity vs. uncovered interest rate parity for NAFTA countries: The value of incorporating time-varying parameter model." Economic Modelling 90 (August 2020): 494–500. http://dx.doi.org/10.1016/j.econmod.2019.11.034.

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9

Bhatti, Muhammad Awais, Noman Arshed, and Muhammad Haseeb. "Performance of CHEERs Based Equilibrium Exchange Rate of Pakistan." Business and Management Horizons 1, no. 1 (March 13, 2013): 17. http://dx.doi.org/10.5296/bmh.v1i1.3374.

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In pursuit to sketch the Pakistan USA Exchange Rate patterns for the duration of 1991M3 to 2010M5 using the CHEERS model, the role of Goods Market and Financial Market is implied through the Purchasing Power Parity (PPP) and Uncovered Interest Parity (UIP) respectively. The results using Vector Error Correction Model (VECM) revealed that both Parities work in combination with near unity elasticities to explain the motion of Exchange Rate in Long Run, but it showed very slow degree of convergence (around 3 and half years) to this equilibrium path after any shock.

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10

Valchev, Rosen. "Bond Convenience Yields and Exchange Rate Dynamics." American Economic Journal: Macroeconomics 12, no. 2 (April 1, 2020): 124–66. http://dx.doi.org/10.1257/mac.20170391.

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This paper proposes a new explanation for the failure of Uncovered Interest Parity (UIP) that rationalizes both the classic UIP puzzle and the evidence that the puzzle reverses direction at longer horizons. In the model, excess currency returns arise as compensation for endogenous fluctuations in bond convenience yield differentials. Due to the interaction of monetary and fiscal policy, the impulse response of the equilibrium convenience yield is nonmonotonic, which generates the reversal of the puzzle. The calibrated model fits exchange rate dynamics very well. I also find direct evidence linking convenience yields to excess currency returns. (JEL E43, E52, F31, F41, H63)

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11

ELLIOTT, ROBERT J., and BING HAN. "A HIDDEN MARKOV APPROACH TO THE FORWARD PREMIUM PUZZLE." International Journal of Theoretical and Applied Finance 09, no. 07 (November 2006): 1009–20. http://dx.doi.org/10.1142/s0219024906003949.

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A Hidden Markov Chain (HMC) is applied to study the forward premium puzzle. The weekly quotient of the interest rate differential divided by the log exchange rate change is modeled as a Hidden Markov process. Compared with existing standard approaches, the Hidden Markov approach allows a detailed analysis of the puzzle on a day-to-day basis while taking into full account the presence of noise in the observations. Two and three state models are investigated. A three-state HMC model performs better than two-state models. Application of the three-state model reveals that the above quotient is mostly zero, and hence leads to the rejection of the uncovered interest rate parity hypothesis.

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12

Danylyshyn, Bohdan, and Ivan Bohdan. "Problems of estimating the neutral interest rate: conclusions for Ukraine." Investment Management and Financial Innovations 18, no. 3 (September 7, 2021): 214–28. http://dx.doi.org/10.21511/imfi.18(3).2021.20.

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Estimation of the actual and projected level of the neutral interest rate is a central issue in the application of modern monetary theory in the practical context of monetary policy. Views on the role and key drivers of neutral interest rates have evolved over time in parallel with the development of the theory of capital, money, credit and economic growth. Therefore, the paper is aimed at generalizing methods for assessing the neutral interest rate for open economies with emerging markets and formulating recommendations for improving the existing methodological tools for estimating the neutral rate in Ukraine. To achieve this goal, theoretical sources, advisory and research materials of international organizations, central banks and statistical databases were analyzed. It is established that the key issue of the current discussion about the tools for estimating the level of neutral interest rates in countries with small open economies is the relationship between the effects of external and internal factors. The paper identifies the advantages and disadvantages of the method for estimating the level of the neutral rate on the basis of uncovered interest parity rule used by the National Bank of Ukraine within the semi-structural macroeconomic model. The expediency of methodological tools introducing into the practice of monetary regulation of Ukraine for estimating the neutral rate of Ukraine based on the Laubach-Williams approach has been proved with adaptation to the conditions of an open economy, which will consider сinternal factors of economic development – changes in potential GDP and savings.

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13

Ferreira, Alex Luiz, and Roseli da Silva. "[NO TITLE AVAILABLE]." Estudos Econômicos (São Paulo) 39, no. 3 (September 2009): 489–512. http://dx.doi.org/10.1590/s0101-41612009000300002.

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The aim of this paper is to investigate the general causes of real interest rate differentials (rids) for a sample of emerging markets for the period of January 1996 to August 2007. To this end, two methods are applied. The first consists of breaking the variance of rids down into relative purchasing power pariety and uncovered interest rate parity and shows that inflation differentials are the main source of rids variation; while the second method breaks down the rids and nominal interest rate differentials (nids) into nominal and real shocks. Bivariate autoregressive models are estimated under particular identification conditions, having been adequately treated for the identified structural breaks. Impulse response functions and error variance decomposition result in real shocks as being the likely cause of rids.

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14

Juselius, Katarina. "Do purchasing power parity and uncovered interest rate parity hold in the long run? An example of likelihood inference in a multivariate time-series model." Journal of Econometrics 69, no. 1 (September 1995): 211–40. http://dx.doi.org/10.1016/0304-4076(94)01669-q.

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15

Tunggal, Noor Zainab, Shariff Umar Shariff Abd. Kadir, and Venus-Khim Sen Liew. "Panel Analysis of Monetary Model of ASEAN-5 Exchange Rates." International Business Research 11, no. 11 (September 27, 2018): 1. http://dx.doi.org/10.5539/ibr.v11n11p1.

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In this study, we examined whether the exchange rates in ASEAN-5 countries are driven by monetary fundamentals. We applied the panel unit root tests and found that the United States denominated nominal exchange rates of Malaysian Ringgit, Indonesian Rupiah, Philippines Peso, Singapore Dollar, and Thailand Baht are all integrated of order one. Meanwhile, relative money supply and relative real income are also integrated in the same order. Nonetheless, the relative interest rate is integrated in order zero, and it implies the uncovered interest rate parity held in ASEAN-5. By using a panel cointegration test pioneered by Pedroni (2000, 2004), we found evidence that there is a long-run relationship between nominal exchange rate and its monetary fundamentals. Consistent with the monetary model of the exchange rate, relative money supply is positively related to nominal exchange rates, while relative real income is negatively related to nominal exchange rates. Therefore, this study reveals the importance of relative real money supply and relative income for the exchange rate market players to predict and monitor ASEAN-5 exchange rates.

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16

Kouretas, Georgios P. "Identifying Linear Restrictions on the Monetary Exchange Rate Model and the Uncovered Interest Parity: Cointegration Evidence from the Canadian-U.S. Dollar." Canadian Journal of Economics 30, no. 4a (November 1997): 875. http://dx.doi.org/10.2307/136275.

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17

Hina, Hafsa, and Abdul Qayyum. "Re-estimation of Keynesian Model by Considering Critical Events and Multiple Cointegrating Vectors." Pakistan Development Review 54, no. 2 (June 1, 2015): 123–45. http://dx.doi.org/10.30541/v54i2pp.123-145.

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This study employs the Mundell (1963) and Fleming (1962) traditional flow model of exchange rate to examine the long run behaviour of rupee/US $ exchange rate for Pakistan economy over the period 1982:Q1 to 2010:Q2. This study investigates the effect of output levels, interest rates and prices and different shocks on exchange rate. Hylleberg, Engle, Granger, and Yoo (HEGY) (1990) unit root test confirms the presence of non-seasonal unit root and finds no evidence of biannual and annual frequency unit root in the level of series. Johansen and Juselious (1988, 1992) likelihood ratio test indicates three long-run cointegrating vectors. Cointegrating vectors are uniquely identified by imposing structural economic restrictions on purchasing power parity (PPP), uncovered interest parity (UIP) and current account balance. Finally, the short-run dynamic error correction model is estimated on the basis of identified cointegrated vectors. The speed of adjustment coefficient indicates that 17 percent of divergence from long-run equilibrium exchange rate path is being corrected in each quarter. US war with Afghanistan has significant impact on rupee in short run because of high inflows of US aid to Pakistan after 9/11. Finally, the parsimonious short run dynamic error correction model is able to beat the naïve random walk model at out of sample forecasting horizons. JEL Classification: F31, F37, F47 Keywords: Exchange Rate Determination, Keynesian Model, Cointegration, Out of Sample Forecasting, Random Walk Model

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18

Bozhechkova, A. V., S. G. Sinelnikov-Murylev, and P. V. Trunin. "Factors of the Russian ruble exchange rate dynamics in the 2000s and 2010s." Voprosy Ekonomiki, no. 8 (August 3, 2020): 5–22. http://dx.doi.org/10.32609/0042-8736-2020-8-5-22.

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The article discusses the key factors of the ruble exchange rate dynamics, analyzes the features of Russian currency market in the context of inflation targeting and the application of the budget rule. The basic theoretical approaches to modeling the dynamics of real and nominal exchange rates are presented, including behavioral models of the exchange rate, the monetary model of the exchange rate, and the hypothesis of uncovered interest parity. The most important factors of long-term and short-term dynamics of the exchange rate are revealed. The results of an econometric evaluation of the models of the real and nominal ruble exchange rates using dynamic least squares method (DOLS) are presented. It is shown that the key factors shaping the dynamics of the nominal ruble exchange rate are the terms of trade, the interest rate spread, the VIX volatility index, and the operations of the Russian Ministry of Finance under the budget rule. The long-term trajectory of the real exchange rate is formed by the terms of trade conditions, the Balassa—Samuelson effect, the dynamics of net foreign assets of the private sector.

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19

I. Dimitriou, Dimitrios, and Theodore M. Simos. "Contagion effects on stock and FX markets." Studies in Economics and Finance 31, no. 3 (July 29, 2014): 246–54. http://dx.doi.org/10.1108/sef-07-2012-0075.

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Purpose – This paper aims to investigate the contagion effects of stock and FX markets for the USA and european monetary union (EMU) during the US subprime crisis of 2007-2009. Design/methodology/approach – The data sample is daily comprising a weighted Morgan Stanley Capital Index (MSCI) for US and EMU equity markets, as well as EUR/USD exchange rate and 3-month US and EMU interest rate indices. The authors model, simultaneously, the dynamic conditional correlations (DCC) for the triplet: US, EMU equity markets and euro – USD uncovered interest rate parity (UIP) via a multivariate GARCH(1,1)-DCC model. The authors also test for a level shift increase of DCCs during the crisis period by incorporating a dummy variable in a GARCH(1,1) model. Findings – Our results suggest the presence of contagion for the US stock market and UIP. These results indicate that possibilities for portfolio diversification exist even in periods of severe financial turmoil. This can be explained by the different monetary policies that followed during the crisis. While USA increased liquidity through stimulus packages in early 2009, EMU preferred a strict monetary policy and fiscal austerity measures. Consequently, the EUR/USD exchange rate was less volatile than the EMU equities, resulting in their weak co-movement. Originality/value – These findings confirm a specific pattern of contagion that provide important implications for international investors and policy-makers.

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20

Zhang, Yuchen, and Shigeyuki Hamori. "The Predictability of the Exchange Rate When Combining Machine Learning and Fundamental Models." Journal of Risk and Financial Management 13, no. 3 (March 4, 2020): 48. http://dx.doi.org/10.3390/jrfm13030048.

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In 1983, Meese and Rogoff showed that traditional economic models developed since the 1970s do not perform better than the random walk in predicting out-of-sample exchange rates when using data obtained after the beginning of the floating rate system. Subsequently, whether traditional economical models can ever outperform the random walk in forecasting out-of-sample exchange rates has received scholarly attention. Recently, a combination of fundamental models with machine learning methodologies was found to outcompete the predictability of random walk (Amat et al. 2018). This paper focuses on combining modern machine learning methodologies with traditional economic models and examines whether such combinations can outperform the prediction performance of random walk without drift. More specifically, this paper applies the random forest, support vector machine, and neural network models to four fundamental theories (uncovered interest rate parity, purchase power parity, the monetary model, and the Taylor rule models). We performed a thorough robustness check using six government bonds with different maturities and four price indexes, which demonstrated the superior performance of fundamental models combined with modern machine learning in predicting future exchange rates in comparison with the results of random walk. These results were examined using a root mean squared error (RMSE) and a Diebold–Mariano (DM) test. The main findings are as follows. First, when comparing the performance of fundamental models combined with machine learning with the performance of random walk, the RMSE results show that the fundamental models with machine learning outperform the random walk. In the DM test, the results are mixed as most of the results show significantly different predictive accuracies compared with the random walk. Second, when comparing the performance of fundamental models combined with machine learning, the models using the producer price index (PPI) consistently show good predictability. Meanwhile, the consumer price index (CPI) appears to be comparatively poor in predicting exchange rate, based on its poor results in the RMSE test and the DM test.

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21

Kim, Soyoung. "Effects of Monetary Policy Shocks on the Exchange Rate in the Republic of Korea: Capital Flows in Stock and Bond Markets." Asian Development Review 31, no. 1 (March 2014): 121–35. http://dx.doi.org/10.1162/adev_a_00023.

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Several studies have suggested that the prediction of standard theory on the effects of monetary policy on the exchange rate might not be applicable to or in the case of the Republic of Korea because participation of foreign investors is weak in the bond market but strong in the stock market. The current study examines the effects of monetary policy shocks on the exchange rate in the Republic of Korea by using structural vector autoregression models with sign restrictions. To determine the channels by which monetary policy shocks affect the exchange rate, I investigate the effects on various components of capital flows. The main empirical findings are as follows. First, a contractionary monetary policy shock, which increases the interest rate, appreciates the Korean won significantly in the short run as predicted by most theories. Second, contractionary monetary policy shocks increase capital inflows into the bond market consistent with the prediction of the uncovered interest parity condition. This seems to be the main channel by which contractionary monetary shocks appreciate the won. Finally, foreign investors tend to withdraw money from the domestic stock market in response to a monetary tightening, resulting in a decrease in capital inflows.

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22

Czech, Katarzyna. "Uncovered interest rate parity on the Japanese yen exchange rate market." Oeconomia Copernicana 3, no. 3 (September 30, 2012): 63–77. http://dx.doi.org/10.12775/oec.2012.015.

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The aim of the paper is to verify the uncovered interest rate parity hypothesis on the Japanese yen exchange rate market. The article describes the theory of uncovered interest rate parity and presents the review of previous research results. Moreover, the paper characterizes the currency speculation strategy „carry trade” which is fundamentally based on the assumption that the uncovered interest rate parity doesn’t hold. The Japanese yen is one of the most popular „carry trade” funding currency and therefore the article is focused on the analysis of this exchange rate market.The uncovered interest rate parity condition suggests that „carry trade” strategy should not result in excess profits. However, the high average payoff to „carry trade” is widely documented by many researchers and thus it may imply that uncovered interest rate parity doesn’t hold on the Japanese yen market. The uncovered interest rate parity on the Japanese yen market is tested by applying the conventional regression approach and orthogonality test of the forward rate forecast error. The results show that it is hard to say definitely that uncovered interest rate parity holds on the analyzed exchange rate market. The uncovered interest rate parity hypothesis is rejected for JPY/TRY market. However, there is not enough evidence to reject UIP hypothesis for JPY/NZD and JPY/USD exchange rate markets.

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23

AISHA, ZINAZ, and MUHAMMAD OMER. "Testing Uncovered Interest Rate Parity for Pakistan." International Review of Management and Business Research 9, no. 4 (December 7, 2020): 56–66. http://dx.doi.org/10.30543/9-4(2020)-6.

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This paper provides direct empirical assessment of Uncovered Interest Rate Parity (UIP) for Pakistan. To Test UIP, wide range of maturities have been used and for estimation purpose, we used Johansen cointegration and Dynamic Ordinary Least Square (DOLS). We find that UIP does not hold for short to medium term maturities. However for the long term maturities i.e., 10-year, the result showes that the UIP holds. It means the exchange rate is better predicted by the long term interest rates. These findings suggest that the interventions in the foreign exchange market distort the price discovery mechanism of the foreign currency in the short to medium term. In the long run, however, the market fundamentals dictate the price discovery guiding the exchange rate to converge to its long run equilibrium. Keywords: UIP, Johansen Cointegration, DOLS, Foreign Exchange Market, Price Discovery Mechanism.

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24

Omer, Muhammad, Jakob de Haan, and Bert Scholtens. "Testing uncovered interest rate parity using LIBOR." Applied Economics 46, no. 30 (July 25, 2014): 3708–23. http://dx.doi.org/10.1080/00036846.2014.939375.

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25

Adrangi, Bahram, Mary Allender, and Kambiz Raffiee. "Emerging markets and uncovered interest rate parity." Atlantic Economic Journal 31, no. 3 (September 2003): 291. http://dx.doi.org/10.1007/bf02298824.

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26

Omer, Muhammad, Jakob de Haan, and Bert Scholtens. "Does Uncovered Interest Rate Parity Hold After All?" LAHORE JOURNAL OF ECONOMICS 24, no. 2 (July 1, 2019): 49–72. http://dx.doi.org/10.35536/lje.2019.v24.i2.a3.

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This paper tests Uncovered Interest Rate Parity (UIP) using LIBOR rates for six major international currencies for the period January 2001 to December 2008. We find that UIP generally holds over a short-term (above 5-months) horizon for individual as well as groups of currencies. Our results suggest that it is important to consider the cross-correlation between currencies. We also find that “state dependence” plays an important role for currencies with a negative interest rate differential vis-à-vis the US dollar. This state dependence could also be instrumental in explaining exchange rate overshooting.

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27

Bekaert, Geert, Min Wei, and Yuhang Xing. "Uncovered interest rate parity and the term structure." Journal of International Money and Finance 26, no. 6 (October 2007): 1038–69. http://dx.doi.org/10.1016/j.jimonfin.2007.05.004.

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28

Ismailov, Adilzhan, and Barbara Rossi. "Uncertainty and deviations from uncovered interest rate parity." Journal of International Money and Finance 88 (November 2018): 242–59. http://dx.doi.org/10.1016/j.jimonfin.2017.07.012.

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29

Craighead, William D., George K. Davis, and Norman C. Miller. "Interest differentials and extreme support for uncovered interest rate parity." International Review of Economics & Finance 19, no. 4 (October 2010): 723–32. http://dx.doi.org/10.1016/j.iref.2010.03.008.

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30

Aliuddin, Sadaf. "Uncovered Interest-Rate Parity over the Past Two Centuries." CFA Digest 41, no. 3 (August 2011): 33–35. http://dx.doi.org/10.2469/dig.v41.n3.6.

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31

Lothian, James R., and Liuren Wu. "Uncovered interest-rate parity over the past two centuries." Journal of International Money and Finance 30, no. 3 (April 2011): 448–73. http://dx.doi.org/10.1016/j.jimonfin.2011.01.005.

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32

Frachot, Antoine. "A reexamination of the uncovered interest rate parity hypothesis." Journal of International Money and Finance 15, no. 3 (June 1996): 419–37. http://dx.doi.org/10.1016/0261-5606(96)00008-3.

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33

GALí, JORDI. "Uncovered Interest Parity, Forward Guidance and the Exchange Rate." Journal of Money, Credit and Banking 52, S2 (December 2020): 465–96. http://dx.doi.org/10.1111/jmcb.12759.

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34

Ames, Matthew, Guillaume Bagnarosa, and Gareth W. Peters. "Violations of uncovered interest rate parity and international exchange rate dependences." Journal of International Money and Finance 73 (May 2017): 162–87. http://dx.doi.org/10.1016/j.jimonfin.2017.01.002.

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35

Edison, Hali J., and William R. Melick. "Purchasing Power Parity and Uncovered Interest Rate Parity : The United States 1974 - 1990." International Finance Discussion Paper 1992, no. 425 (1992): 1–31. http://dx.doi.org/10.17016/ifdp.1992.425.

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36

Ichiue, Hibiki, and Kentaro Koyama. "Regime switches in exchange rate volatility and uncovered interest parity." Journal of International Money and Finance 30, no. 7 (November 2011): 1436–50. http://dx.doi.org/10.1016/j.jimonfin.2011.07.003.

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37

Rose, Andrew K., and Robert P. Flood. "Uncovered Interest Parity in Crisis: The Interest Rate Defense in the 1990's." IMF Working Papers 01, no. 207 (2001): 1. http://dx.doi.org/10.5089/9781451874655.001.

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38

Boschen, John F., and Kimberly J. Smith. "The Uncovered Interest Rate Parity Anomaly And Foreign Exchange Market Turnover." International Business & Economics Research Journal (IBER) 11, no. 3 (February 15, 2012): 299. http://dx.doi.org/10.19030/iber.v11i3.6862.

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The uncovered interest rate parity (UIP) anomaly is that high interest rate currencies appreciate, rather than depreciate, against low interest rate currencies. We show that the UIP anomalies apparent in six major currency pairs have diminished over our 1995-2010 sample period. We further show that the observed decline in deviations from UIP is associated with the substantially higher transaction volume now present in the foreign exchange markets. We interpret our findings as consistent with the proposition that the UIP anomaly dissipates as the foreign exchange markets become more efficient.

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39

Francis, Bill B., Iftekhar Hasan, and Delroy M. Hunter. "Emerging market liberalization and the impact on uncovered interest rate parity." Journal of International Money and Finance 21, no. 6 (November 2002): 931–56. http://dx.doi.org/10.1016/s0261-5606(02)00029-3.

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40

Rabitsch, Katrin. "An Incomplete Markets Explanation of the Uncovered Interest Rate Parity Puzzle." Review of International Economics 24, no. 2 (March 3, 2016): 422–46. http://dx.doi.org/10.1111/roie.12220.

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41

Engel, Charles, Dohyeon Lee, Chang Liu, Chenxin Liu, and Steve Pak Yeung Wu. "The uncovered interest parity puzzle, exchange rate forecasting, and Taylor rules." Journal of International Money and Finance 95 (July 2019): 317–31. http://dx.doi.org/10.1016/j.jimonfin.2018.03.008.

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42

Živkov, Dejan, Jovan Njegić, Mirela Momčilović, and Ivan Milenković. "Exchange Rate Volatility and Uncovered Interest Rate Parity in the European Emerging Economies." Prague Economic Papers 25, no. 3 (January 1, 2016): 253–70. http://dx.doi.org/10.18267/j.pep.562.

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43

Moh, Young-Kyu. "Continuous-time model of uncovered interest parity with regulated jump-diffusion interest differential." Applied Economics 38, no. 21 (December 10, 2006): 2523–33. http://dx.doi.org/10.1080/00036840500427809.

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Chanthol, Hay. "Uncovered Interest Parity and Expected Depreciation in a Dollarized Cambodian Economy." Journal of Asian Research 5, no. 1 (March 3, 2021): p47. http://dx.doi.org/10.22158/jar.v5n1p47.

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This paper tests the Uncovered Interest Parity (UIP) for Cambodian economy using the Generalized Methods of Moment (GMM). GMM method is used to address the weak result of simple OLS method, including the problems of endoneneity, serial correlation, heteroskedasticity. The result showed that, during the period of exchange rate stability, UIP is not valid even the country is a very highly dollarized economy and people can save in both local currency and USD in domestic banks. The UIP coefficient is negative and significant for three-month and six-month interest rates. The negative coefficient suggests that the monetary policy that tries to decrease interest rate (increase) may face the risk of currency depreciation (appreciation). If local currency depreciation is the driving force of dollarization, reducing local interest rate will encourage more dollarization in the economy.

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Mandel, Martin, and Jan Vejmělek. "Analysis of Relations in Uncovered Interest Rate Parity: Example of CZK/EUR Exchange Rate." Politická ekonomie 69, no. 3 (June 28, 2021): 340–59. http://dx.doi.org/10.18267/j.polek.1322.

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Lily, Jaratin, Mori Kogid, Dullah Mulok, and Rozilee Asid. "Revisiting Uncovered Interest Rate Parity: An Empirical Testing Using Bounds Test Approach." Procedia Economics and Finance 2 (2012): 45–52. http://dx.doi.org/10.1016/s2212-5671(12)00063-9.

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HOLLIFIELD, BURTON, and RAMAN UPPAL. "An Examination of Uncovered Interest Rate Parity in Segmented International Commodity Markets." Journal of Finance 52, no. 5 (December 1997): 2145–70. http://dx.doi.org/10.1111/j.1540-6261.1997.tb02756.x.

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Baillie, Richard T., and William P. Osterberg. "Deviations from daily uncovered interest rate parity and the role of intervention." Journal of International Financial Markets, Institutions and Money 10, no. 3-4 (December 2000): 363–79. http://dx.doi.org/10.1016/s1042-4431(00)00029-9.

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Czech, Katarzyna, and Łukasz Pietrych. "The Efficiency of the Polish Zloty Exchange Rate Market: The Uncovered Interest Parity and Fractal Analysis Approaches." Risks 9, no. 8 (August 1, 2021): 142. http://dx.doi.org/10.3390/risks9080142.

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The study of the effectiveness of the currency market is one of the most important research problems in the field of finance. The paper aims to assess the efficiency of the Polish zloty exchange rate market. We test the market efficiency by applying two independent approaches, one based on the Uncovered Interest Parity theory, and another based on the fractal analysis of exchange rates series. The research results show that the Uncovered Interest Parity holds only on the USD/PLN market. For EUR/PLN, JPY/PLN, CHF/PLN, MXN/PLN and TRY/PLN, the Uncovered Interest Parity hypothesis is rejected and implies the existence of the forward premium anomaly and market inefficiency. The estimated Hurst coefficient provides insight into the long-range dependence of exchange rates. The MXN/PLN, TRY/PLN and EUR/PLN exchange rates exhibit anti-persistent behaviours suggesting mean-reverting characteristics. For JPY/PLN and CHF/PLN, a high value of the Hurst exponent indicates long memory in the time series. Only for USD/PLN, we achieve the Hurst exponent closest to 0.5, which implies market efficiency. The research results obtained based on the UIP hypothesis and fractal analysis are consistent. The study reveals that the market efficiency hypothesis holds only for the most tradable Polish zloty currency pair, i.e., USD/PLN.

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Carriero, Andrea. "Explaining US-UK Interest Rate Differentials: A Reassessment of the Uncovered Interest Rate Parity in a Bayesian Framework*." Oxford Bulletin of Economics and Statistics 68 (November 23, 2006): 879–99. http://dx.doi.org/10.1111/j.1468-0084.2006.00461.x.

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