Do Exchange Rates Move in Line With Uncovered Interest Parity?

According to uncovered interest rate Parity (UIP), the expected relative change in an exchange rate is equal to the difference between interest rates between the two currencies. Empirically, UIP is frequently rejected. In this paper, we examine whether exchange rates have at least any tendency to move in the direction predicted by UIP and whether exchange rates tend to move more in line with UIP in periods with large interest rate differentials.

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Year of publication:	2007-02-19
Authors:	Huisman, R. ; Mahieu, R.J. ; Mulder, A.
Institutions:	Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
Subject:	Exchange rates \| Uncovered interest rate parity \| Logit models

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Extent:	application/pdf
Series:	Research Paper. - ISSN 1566-5283.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series RePEc:dgr:eureri Number ERS-2007-012-F&A
Source:	RePEc - Research Papers in Economics

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