Uncovered Interest Parity

May 1, 1991

Preview Citation

Format: Chicago

Peter Isard. Uncovered Interest Parity, (USA: International Monetary Fund, 1991) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This note provides an overview of the uncovered interest parity assumption. It traces the history of the interest parity concept, summarizes evidence on the empirical validity of uncovered interest parity, and discusses the implications for macroeconomic analysis. The uncovered interest parity assumption has been an important building block in multiperiod and continuous time models of open economies, and although its validity is strongly challenged by the empirical evidence, its retention in macroeconomic models is supported on pragmatic grounds, at least for the time being, by the lack of much empirical support for existing models of the exchange risk premium.

Subject: Currencies, Exchange rates, Forward exchange rates, Interest rate parity, Spot exchange rates

Keywords: Exchange market intervention, Market, UIP, UIP assumption, WP

Publication Details

Pages:

12
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1991/051
Stock No:

WPIEA0511991
ISBN:

9781451847017
ISSN:

1018-5941

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