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Desviaciones de la paridad cubierta de tasas de interés: experiencia internacional y el caso de Chile

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  • Catalina Morales
  • Rodrigo Vergara

Abstract

The covered interest-rate parity (CIP) is normally seen as both a theoretical and empirical reality arising from the non-arbitrage of international markets. However, this was not true during the global financial crisis of 2008 for the main currencies of the world, a situation that has surprisingly remained until today. In Chile, it can be seen that the CIP actually broke down during the financial crisis but, since 2012-2013, it has been restored. Analyzing the movements of sovereign CDS bonds, we conclude that credit risk cannot by itself explain the deviations of the CIP. We do not find the same relationship between the strong dollar and the deviation of the CIP observed in international markets. In the case of Chile, our results suggest that the effect of the strong dollar on the on-shore spread is more closely related to variations in the demand for currency hedging.

Suggested Citation

  • Catalina Morales & Rodrigo Vergara, 2017. "Desviaciones de la paridad cubierta de tasas de interés: experiencia internacional y el caso de Chile," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 20(3), pages 082-100, December.
  • Handle: RePEc:chb:bcchec:v:20:y:2017:i:3:p:082-100
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    References listed on IDEAS

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    1. Stefan Avdjiev & Wenxin Du & Cathérine Koch & Hyun Song Shin, 2019. "The Dollar, Bank Leverage, and Deviations from Covered Interest Parity," American Economic Review: Insights, American Economic Association, vol. 1(2), pages 193-208, September.
    2. Wenxin Du & Alexander Tepper & Adrien Verdelhan, 2018. "Deviations from Covered Interest Rate Parity," Journal of Finance, American Finance Association, vol. 73(3), pages 915-957, June.
    3. Anastasios G Malliaris & William T Ziemba (ed.), 2015. "The World Scientific Handbook of Futures Markets," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 8984, March.
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    More about this item

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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