Monetary policy implementation and uncovered interest parity: empirical evidence from Oceania
AbstractThe close integration of Australian and New Zealand financial markets and the similarity of the monetary policy regimes provide the perfect backdrop for testing the empirical relevance of uncovered interest rate parity (UIP) in Oceania. We find that changes in the bilateral exchange rate have become more sensitive to the short-term interest differential over time. Most important, after the introduction of the Official Cash Rate regime in New Zealand, the responsiveness of the exchange rate has accelerated to such an extent that it is incompatible with UIP. Evidence on UIP over longer horizons is mixed with a 10-year horizon providing the strongest support for the theory since 1990.
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Bibliographic InfoPaper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 10/71.
Length: 35 pages
Date of creation: 01 Jun 2010
Date of revision:
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Other versions of this item:
- Alfred Guender & Bevan Cook, 2011. "Monetary policy implementation and uncovered interest parity: Empirical evidence from Oceania," New Zealand Economic Papers, Taylor & Francis Journals, vol. 45(3), pages 209-229, January.
- Alfred Guender & Bevan Cook, 2010. "Monetary policy implementation and uncovered interest parity: empirical evidence from Oceania," Reserve Bank of New Zealand Discussion Paper Series DP2010/12, Reserve Bank of New Zealand.
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-27 (All new papers)
- NEP-IFN-2010-11-27 (International Finance)
- NEP-MON-2010-11-27 (Monetary Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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