Dynamic model of uncovered interest rate parity (theory and empirical verification in the transitive economies)
AbstractThe paper presents a dynamic approach to the theory of uncovered interest rate parity. It is examined the dynamic relation between the actual change in spot exchange rate and interest rate differential. Authors show the hypothesis of uncovered interest rate parity is based on an ex ante view and that is the reason that the expected change in spot exchange rate cannot be replaced by an ex post approach. The dynamic approach developed in the paper is empirically tested for five transitive countries of Central and Eastern Europe. The model is estimated using both VAR and cointegration analyses. The model of error correction is also included in the empirical verification of the model.
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Bibliographic InfoArticle provided by University of Economics, Prague in its journal Politická ekonomie.
Volume (Year): 2005 (2005)
Issue (Month): 3 ()
Postal: Redakce Politické ekonomie, Vysoká škola ekonomická, nám. W. Churchilla 4, 130 67 Praha 3
Find related papers by JEL classification:
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F31 - International Economics - - International Finance - - - Foreign Exchange
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
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