Uncovering uncovered interest parity during the classical gold standard era, 1888-1905
AbstractThis paper examines the uncovered interest parity hypothesis using the dollar-sterling exchange rate during the gold standard era. This period is interesting because the exchange rate was seasonal, because transactions costs were high, and because occasions when uncovered interest rate speculation did not occur can be identified. The paper shows UIP speculation frequently did not occur, that speculation occurred more in response to expected exchange rate changes than interest rate differentials, and that profitability varied systematically with interest rate differentials. The estimated UIP equations are substantially improved by distinguishing occasions when sterling was borrowed not lent.
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Bibliographic InfoPaper provided by Motu Economic and Public Policy Research in its series Working Papers with number 10_02.
Length: 27 pages
Date of creation: Feb 2010
Date of revision:
Uncovered interest parity; gold standard;
Find related papers by JEL classification:
- N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-20 (All new papers)
- NEP-HIS-2010-11-20 (Business, Economic & Financial History)
- NEP-IFN-2010-11-20 (International Finance)
- NEP-MON-2010-11-20 (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.:
- Paul Hallwood, C. & MacDonald, Ronald & Marsh, Ian W., 2000. "Realignment expectations and the US dollar, 1890-1897: Was there a 'Peso problem'?," Journal of Monetary Economics, Elsevier, vol. 46(3), pages 605-620, December.
- Officer,Lawrence H., 2007. "Between the Dollar-Sterling Gold Points," Cambridge Books, Cambridge University Press, number 9780521038218, 9.
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