Co-Movements in Long-Term Interest Rates and the Role of PPP-Based Exchange Rate Expectations
AbstractWe investigate international co-movements in bond yields by testing for uncovered interest parity. We supplement existing work by focussing on long instead of short-term interest rates, and, related to that, by employing exchange rate expectations derived from purchasing power parity instead of actual outcomes. For the major floating currencies over the period 1975-97, we cannot support the notion of further increases in co-movement beyond that associated with the wave of financial market liberalization and deregulation in the early 1980s. Given the similarity between PPP-based UIP tests and those employing actual exchange rate outcomes, the value added of the former mainly lies with their ready availability.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 99/81.
Date of creation: 01 Jun 1999
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- J.M. Berk & K.H.W. Knot, 1999. "Co-Movements in Long-Term Interest Rates and the Role of PPP-BasedExchange Rate Expectations," DNB Staff Reports (discontinued) 37, Netherlands Central Bank.
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
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