Uncovered Interest Parity: Cross‐Sectional Evidence
AbstractThis paper proposes a different empirical approach to estimate the UIP by analyzing a large number of cross-country bilateral exchange rates using cross-section analysis. Different from conventional time-series UIP, cross-sectional UIP is examined with single equation estimation and panel regression model estimation. The exchange rates analyzed here include a broad spectrum of countries: developed, developing, low inflation and high inflation countries. Based on the empirical evidence, there does not appear to be a well-publicized UIP puzzle for cross-sectional UIP, and the slope estimates remain largely between zero and one throughout the sample periods, with a few exceptions. Evidence of UIP is more clear for low inflation countries than for high inflation countries. As interest rate maturity becomes longer, UIP relationship becomes weaker.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of International Economics.
Volume (Year): 19 (2011)
Issue (Month): 2 (05)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576
Other versions of this item:
- Lee, Byung-Joo, 2007. "Uncovered Interest Parity: Cross-sectional Evidence," MPRA Paper 10360, University Library of Munich, Germany.
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- F31 - International Economics - - International Finance - - - Foreign Exchange
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