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covered interest parity

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Author Info

  • C. Emre Alper
  • Oya Pinar Ardic

Abstract

Covered Interest Parity describes an idealised situation in foreign exchange markets in which the interest rates on assets differing only in the currency of denomination will be equal. This article describes the theoretical assumptions under which CIP holds and the evidence for CIP in practice.

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Bibliographic Info

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This chapter was published in: Steven N. Durlauf & Lawrence E. Blume (ed.) , , pages , 2010, 2nd quarter update.

This item is provided by Palgrave Macmillan in its series The New Palgrave Dictionary of Economics with number v:4:year:2010:doi:3823.

Handle: RePEc:pal:dofeco:v:4:year:2010:doi:3823

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Related research

Keywords: CIP; counterparty risk; emerging markets; foreign exchange;

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Cited by:
  1. Andrew Ang & Allan Timmermann, 2011. "Regime Changes and Financial Markets," NBER Working Papers 17182, National Bureau of Economic Research, Inc.
  2. Massimo Guidolin & Francesca Rinaldi, 2010. "Ambiguity in asset pricing and portfolio choice: a review of the literature," Working Papers 2010-028, Federal Reserve Bank of St. Louis.
  3. Engel, Charles, 2011. "The Real Exchange Rate, Real Interest Rates, and the Risk Premium," Economics Series 265, Institute for Advanced Studies.
  4. Riané de Bruyn & Rangan Gupta & Lardo Stander, 2013. "Testing the Monetary Model for Exchange Rate Determination in South Africa: Evidence from 101 Years of Data," Contemporary Economics, University of Finance and Management in Warsaw, vol. 7(1), March.
  5. Ian Martin, 2011. "The Forward Premium Puzzle in a Two-Country World," NBER Working Papers 17564, National Bureau of Economic Research, Inc.
  6. Tze-Haw Chan & Chee-Wooi Hooy & Ahmad Zubaidi Baharumshah, 2012. "A structural VARX modelling of international parities between China and Japan in the liberalization era," Economics Bulletin, AccessEcon, vol. 32(1), pages 730-736.
  7. Kotaro Ishi & Kenji Fujita & Mark R. Stone, 2011. "Should Unconventional Balance Sheet Policies Be Added to the Central Bank toolkit? a Review of the Experience so Far," IMF Working Papers 11/145, International Monetary Fund.

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