Covered Interest Parity Deviations: Macrofinancial Determinants
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Summary:
For about three decades until the Global Financial Crisis (GFC), Covered Interest Parity (CIP) appeared to hold quite closely—even as a broad macroeconomic relationship applying to daily or weekly data. Not only have CIP deviations significantly increased since the GFC, but potential macrofinancial drivers of the variation in CIP deviations have also become significant. The variation in CIP deviations seems to be associated with multiple factors, not only regulatory changes. Most of these do not display a uniform importance across currency pairs and time, and some are associated with possible temporary considerations (such as asynchronous monetary policy cycles).
Series:
Working Paper No. 2019/014
Subject:
Banking Currencies Financial crises Financial markets Financial services Global financial crisis of 2008-2009 Interbank rates Interest rate parity Money Money markets
English
Publication Date:
January 16, 2019
ISBN/ISSN:
9781484390122/1018-5941
Stock No:
WPIEA2019014
Pages:
36
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