Interest Parity, Cointegration, and the Term Structure in Canada and the United States
In this paper, the author uses a simple but powerful technique to examine two models of the term structure for an open economy. Cointegration tests using two data sets for Canada and the United States support the open economy model based on uncovered interest parity as an explanation for the Canadian term structure of interest rates. Support for the generalized-present-value model is, at best, mixed. This lack of support may be attributable to low test power due to the author's smaller sample or to differences in the periods examined.
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Volume (Year): 24 (1991)
Issue (Month): 3 (August)
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