Do Exchange Rates Move in Line With Uncovered Interest Parity?
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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.
- G3 : Corporate Finance and Governance
- E43 : Determination of Interest Rates; Term Structure of Interest Rates
- M : Business Administration and Business Economics; Marketing; Accounting
- exchange rates
- interest rate parity
- exchange rate
- interest parity
- interest rate differentials
- interest differentials
- interest rate
- exchange rates move