This paper investigates the validity of Covered Interest Rate Parity (CIP) in longdated fixed income securities. I show that common measures of CIP rely on trading strategies subject to rollover risk and credit risk, or fail to fully account for the trading costs. Hence, roundtrip CIP profit is...

This paper investigates the effectiveness of the Federal Reserve's Term Auction Facility (TAF) in alleviating the liquidity shortage in USD and reducing the spread between the 3-month Libor rate and the expected policy rate. I construct a proxy for the 3-month liquidity risk premium based on...

This paper studies the violation of the most basic no-arbitrage condition in international finance - Covered Interest Parity (CIP). To understand the CIP conundrum, it is key to (i) account for funding frictions in U.S. dollar money markets, and (ii) to study the challenges of swap...

This paper analyses the liquidity effect in Norway by examining the relationship between a range of liquidity variables and five different measures of the short-term interbank premium. The models are estimated on data from January 2007 and up to the end of September 2011, a period in which...

We show corporate real effects from Covered Interest Parity (CIP) deviations, exploiting administrative data from Norway as well as CIP deviation shocks. Banks with access to U.S. money markets strongly increase short-term USD funding in response to CIP deviations. This, in turn, leads to higher...

Using new transaction-level data for non-financial commercial paper (CP) in the U.S., we show that companies systematically reduce their outstanding short-term debt on quarterly and annual disclosure dates. Constraints on CP lending supply cannot explain this pattern. Instead, firms prefer...