Uncovered Interest Parity in Crisis: The Interest Rate Defense in the 1990s
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Summary:
This paper tests for uncovered interest parity (UIP) using daily data for 23 developing and developed countries through the crisis-strewn 1990s. We find that UIP works better on average in the 1990s than in previous eras in the sense that the slope coefficient from a regression of exchange rate changes on interest differentials yields a positive coefficient (which is sometimes insignificantly different from unity). UIP works systematically worse for fixed and flexible exchange rate countries than for crisis countries, but we find no significant differences between rich and poor countries.
Series:
Working Paper No. 2001/207
Subject:
Conventional peg Exchange rate adjustments Exchange rate arrangements Exchange rates Financial services Foreign exchange Interest rate parity
English
Publication Date:
December 1, 2001
ISBN/ISSN:
9781451874655/1018-5941
Stock No:
WPIEA2072001
Pages:
15
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