Do professional forecasters follow uncovered interest rate parity?

Constantin Bürgi, Mengdi Song

Not according to our data. We use two data sets to test whether professional forecasters follow uncovered interest rate parity (UIP) when making their exchange rate predictions both based on point prediction and direction. We find that professional forecasters generally do not follow UIP across a range of currencies and horizons. Given the prevalence of the UIP condition in our international macro models, these results reiterate the importance of finding the drivers for these deviations.

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Year of publication:	September 2024
Authors:	Bürgi, Constantin ; Song, Mengdi
Publisher:	Munich, Germany : CESifo
Subject:	focus economics \| Bloomberg Survey \| exchange rates \| Zinsparität \| Interest rate parity \| Wechselkurs \| Exchange rate \| Schätzung \| Estimation