The Economics of Uncovered Interest Parity Condition for Emerging Markets: A Survey
AbstractFinancial account liberalizations since the second half of the 1980s paved way for the burgeoning literature that investigates foreign exchange market efficiency in emerging markets via testing for the uncovered interest parity (UIP) condition. This paper provides a broad and critical survey on this recent literature as well as a general understanding on the topic through reviewing the related literature on developed economies where recent methodological advances in time series econometrics have provided favorable results, questioning the previously documented UIP puzzle. The literature on emerging markets suggests that these countries deserve a special treatment by taking into account the existence of additional types of risk premia, high inflation episodes, financial contagion, peso problem, simultaneity problem, asymmetricity, and the determination of de facto structural breaks.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 4079.
Date of creation: 30 May 2007
Date of revision:
Uncovered Interest Parity; Forward Premium Bias; Emerging Markets;
Other versions of this item:
- C. Emre Alper & Oya Pinar Ardic & Salih Fendoglu, 2009. "The Economics Of The Uncovered Interest Parity Condition For Emerging Markets," Journal of Economic Surveys, Wiley Blackwell, vol. 23(1), pages 115-138, 02.
- C. Emre Alper & Oya Pinar Ardic & Salih Fendoglu, 2007. "The Economics of Uncovered Interest Parity Condition for Emerging Markets: A Survey," Working Papers 2007/13, Bogazici University, Department of Economics.
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-07-27 (All new papers)
- NEP-CBA-2007-07-27 (Central Banking)
- NEP-CWA-2007-07-27 (Central & Western Asia)
- NEP-IFN-2007-07-27 (International Finance)
- NEP-MON-2007-07-27 (Monetary Economics)
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