2005: A panel study on real interest rate parity
in East Asian countries: Pre and post-liberalization era.
The expectations hypothesis of the term structure of interest rates, open interest rate parity
and central bank policy reaction.
The work of Levich shows that spot rate forecasts based on the futures rate are approximately equal to forecasts based on interest rate parity
with interest rates obtained from the Euro-currency markets.
current interest rate environment and the interest rate parity
The scope for a successful "interest rate defense" of a fixed exchange rate depends on the extent of the deviation from interest rate parity
(e.g., Flood and Rose (2001)).
Cointegration tests applied to simple (bivariate) versions of the model did not provide support for the uncovered interest rate parity
(UIP) or purchasing power parity (PPP) conditions in almost all the countries of the sample.
The exact empirical validity of interest rate parity
for comparable contracts implies strongly that an apparent difference in borrowing costs between two countries is likely attributable to non-comparability of one of the contracts.
A simple way to assess an exchange rate band's credibility is based on uncovered interest rate parity
.(22) Uncovered interest rate parity
states that under perfect international capital mobility and risk-neutral speculation, the differential between nominal domestic and foreign interest rates is equal to the anticipated rate of depreciation of the domestic currency.
An intervention analysis of the Mexican capital control policy of August 1982 shows the policy to have had a negative, but temporary, impact on the Mexican deviation from interest rate parity
. Previous studies concerning the impact of capital control interventions have predicted positive effects of capital control policies.
Adrien Verdelhan and coauthors Wenxin Du, and Alexander Tepper received the AQR Insight Award for their paper on "The Deviations from Covered Interest Rate Parity
We first develop the theoretical rationale of the forward exchange rate unbiasedness hypothesis (FUH) for buyers of forward exchange under an assumption of risk neutrality and interest rate parity
. Then by using Jensen's Inequality, we show that FUH cannot simultaneously hold true for both the sellers and buyers of the same forward currency contracts.