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Covered Interest Parity and the Global Financial Crisis in Four Central and Eastern European Countries


  • Fabio Filipozzi
  • Karsten Staehr


This paper examines the empirical validity of the covered interest parity (CIP) hypothesis in the Czech Republic, Hungary, Poland, and Romania. Before the global financial crisis, CIP was mostly satisfied for the first three countries but not for Romania. During and after the crisis, deviations from CIP have been substantial in all cases but with large differences across the countries. Estimations tie the observed pattern to developments in both global and country-specific risks. In the case of the Czech Republic, increased global risks led to a lower risk premium, indicating that Czech assets functioned as a "safe haven." In Hungary and Poland, increased global risks led to higher risk premiums, suggesting a flight to quality out of Hungarian and Polish assets. Finally, for Romania the deviations from CIP were unrelated to developments in global or local financial risks, reflecting a repressed financial system.

Suggested Citation

  • Fabio Filipozzi & Karsten Staehr, 2013. "Covered Interest Parity and the Global Financial Crisis in Four Central and Eastern European Countries," Eastern European Economics, Taylor & Francis Journals, vol. 51(1), pages 21-35, January.
  • Handle: RePEc:mes:eaeuec:v:51:y:2013:i:1:p:21-35

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    Cited by:

    1. Ferreira, Paulo & Kristoufek, Ladislav, 2017. "What is new about covered interest parity condition in the European Union? Evidence from fractal cross-correlation regressions," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 486(C), pages 554-566.
    2. Paulo Ferreira & Andreia Dionisio, 2015. "Revisiting Covered Interest Parity in the European Union: the DCCA Approach," International Economic Journal, Taylor & Francis Journals, vol. 29(4), pages 597-615, December.
    3. Juan Carlos Cuestas & Fabio Filipozzi & Karsten Staehr, 2017. "Uncovered interest parity in Central and Eastern Europe: Expectations and structural breaks," Review of International Economics, Wiley Blackwell, vol. 25(4), pages 695-710, September.
    4. Nicola Moreni & Andrea Pallavicini, 2017. "Derivative Pricing With Collateralization And Fx Market Dislocations," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 20(06), pages 1-27, September.
    5. Nicola Moreni & Andrea Pallavicini, 2015. "FX Modelling in Collateralized Markets: foreign measures, basis curves, and pricing formulae," Papers 1508.04321,, revised Sep 2015.

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