According to uncovered interest rate Parity (UIP), the expected relative change in an exchange rate is equal to the difference between interest rates between the two currencies. Empirically, UIP is frequently rejected. In this paper, we examine whether exchange rates have at least any tendency to move in the direction predicted by UIP and whether exchange rates tend to move more in line with UIP in periods with large interest rate differentials.

Additional Metadata
Keywords Exchange rates, Logit models, Uncovered interest rate parity
Publisher Erasmus Research Institute of Management (ERIM)
Persistent URL hdl.handle.net/1765/8993
Citation
Huisman, R, Mahieu, R.J, & Mulder, A. (2007). Do Exchange Rates Move in Line With Uncovered Interest Parity? (No. ERS-2007-012-F&A). ERIM report series research in management Erasmus Research Institute of Management. Erasmus Research Institute of Management (ERIM). Retrieved from http://hdl.handle.net/1765/8993