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An alternative approach to testing uncovered interest parity

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  • Razzaque Bhatti
  • Imad Moosa
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    Abstract

    This paper presents some evidence on the uncovered interest parity (UIP) hypothesis using an alternative model specification and quarterly data on three-month treasury bill rates denominated in eleven currencies vis-a-vis the dollar. Results of cointegration and coefficient restriction tests are strongly supportive of UIP in all cases. These results suggest that capital and foreign exchange markets have become highly integrated.

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    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/135048595356916&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
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    Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

    Volume (Year): 2 (1995)
    Issue (Month): 12 ()
    Pages: 478-481

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    Handle: RePEc:taf:apeclt:v:2:y:1995:i:12:p:478-481
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    Cited by:

    1. Ozgur Aslan & H. Levent Korap, 2010. "Does the uncovered interest parity hold in short horizons?," Applied Economics Letters, Taylor & Francis Journals, vol. 17(4), pages 361-365.
    2. Min, Hong-Ghi & McDonald, Judith A. & Choung, Jaeyong, 2003. "Dynamic capital mobility, capital-market risk, and contagion: evidence from seven Asian countries," Japan and the World Economy, Elsevier, vol. 15(2), pages 161-183, April.
    3. Bing Han, 2004. "Is the forward premium puzzle universal?," Applied Economics Letters, Taylor & Francis Journals, vol. 11(2), pages 131-134.
    4. Felmingham, Bruce & Leong, SuSan, 2005. "Parity conditions and the efficiency of the Australian 90- and 180-day forward markets," Review of Financial Economics, Elsevier, vol. 14(2), pages 127-145.
    5. Hong G. Min & McDonald, Judith A., 1999. "Does a thin foreign exchange market lead to destabilizing capital-market speculation in the Asian Crisis countries?," Policy Research Working Paper Series 2056, The World Bank.
    6. Bhatti, Razzaque H., 2014. "The existence of uncovered interest parity in the CIS countries," Economic Modelling, Elsevier, vol. 40(C), pages 227-241.
    7. Levent, Korap, 2007. "Does the interest differential explain future exchange rate return? a re-examination of the UIP hypothesis for the Turkish economy," MPRA Paper 19618, University Library of Munich, Germany.
    8. Tang, Kin-Boon, 2011. "The precise form of uncovered interest parity: A heterogeneous panel application in ASEAN-5 countries," Economic Modelling, Elsevier, vol. 28(1-2), pages 568-573, January.
    9. Chiang, Thomas C. & Kim, Doseong, 2000. "Short-term eurocurrency rate behavior and specifications of cointegrating processes," International Review of Economics & Finance, Elsevier, vol. 9(2), pages 157-179.
    10. Arusha Cooray, 2003. "Financial integration: some evidence from Australia," Applied Economics Letters, Taylor & Francis Journals, vol. 10(15), pages 959-966.

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