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Interest rate expectations and interest parity
Journal of International Money and Finance, 1986Abstract This paper examines an hypothesis for explaining divergences from interest parity that is based on interest rate expectations. If interest rates are expected to rise significantly within the arbitrage oppurtunity implies riskless profit. Waiting in ths way has been noted in the historical literature, seems to make sense theoritically (if ...
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REGIME-SENSITIVE COINTEGRATION WITH AN APPLICATION TO INTEREST-RATE PARITY
Macroeconomic Dynamics, 1997There exist a variety of reasons for the failure to find a unique cointegrating relationship between economic time series where one would normally be expected on the basis of economic theory. Among these are the testing procedure, the span of the data set, the choice of lag length in generating the test statistic, the presence of structural breaks, and
Siklos, Pierre L., Granger, Clive W. J.
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A clarification of the interest rate parity theorem
European Economic Review, 1979Abstract Recognition of the role of market-makers in the euro-deposit and exchange markets, makes it necessary to re-formulate the interest rate parity theorem's predicted equilibrium relationship between forward exchange rates and interest rates in terms of a set of inequalities, rather than an equation.
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Violations of Uncovered Interest Rate Parity and International Exchange Rate Dependences
SSRN Electronic Journal, 2015The uncovered interest rate parity puzzle questions the economic relation existing between short term interest rate differentials and exchange rates. One would indeed expect that the differential of interest rates between two countries should be offset by an opposite evolution of the exchange rate between them, hence ruling out any limited risk profit ...
Matthew Ames +2 more
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Interest Rate Parity and Imperfect Substitutability
1985This chapter is intended to motivate and justify the strategy adopted in Part II; namely, modelling exchange rates within a portfolio-balance framework rather than relying on a monetary approach. The latter, by taking domestic and foreign assets as perfect substitutes, emphasises only one asset, money.
Paul De Grauwe +2 more
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Interest differentials and extreme support for uncovered interest rate parity
International Review of Economics & Finance, 2010Abstract This paper addresses two findings from the empirical literature testing uncovered interest parity (UIP): (i) more favorable results when interest differentials (IDs) are large and (ii) instability across samples. Simulations demonstrate that explanations of the results using large IDs based on the hypothesis of a “zone of speculative ...
William D. Craighead +2 more
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CAPITAL CONTROLS, INTEREST RATE PARITY, AND EXCHANGE RATES: A THEORETICAL APPROACH
International Economic Journal, 1990The purpose of this paper is to analyze, from a theoretical point of view, the impact of capital controls on both the spot and forward exchange rates. While the qualitative impact of these controls on the exchange rates is straightforward, their quantitative impact is shown to depend on several factors including the speed of adjustment of the exchange ...
Ichiro Otani, Siddharth Tiwari
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Markets and International Interest Rate Parity
2012Abstract This chapter provides a general overview of the international markets for foreign exchange (FX) and FX derivatives as well as the theoretical relationships that tie these markets together with interest rates and central bank policies. The chapter begins by summarizing the FX markets and discussing their current size and uses. It
SUK HUN LEE, A. G. MALLIARIS
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Causes of Deviation from Interest-Rate Parity: Comment
Journal of Money, Credit and Banking, 1972There appears to be a considerable degree of controversy about the reasons for observing divergences from interest rate parity.l It seems useful, therefore, to state more explicitly the factors which may cause such divergences. The interest rate parity theory (IRPT) is an example of the general economic law that two identical commodities cannot sell ...
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Uncovered Interest Rate Parity: The Turkish Evidence
Review of Middle East Economics and Finance, 2018AbstractThis paper presents an empirical investigation of the uncovered interest parity (UIP) between the Turkish Lira (TRY)/US Dollar (USD) and Turkish Lira/Euro (EUR). Our results do not provide evidence supporting the UIP hypothesis for either case.
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