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covered interest parity

Author

Listed:
  • C. Emre Alper
  • Oya Pinar Ardic

Abstract

Covered Interest Parity describes an idealised situation in foreign exchange markets in which the interest rates on assets differing only in the currency of denomination will be equal. This article describes the theoretical assumptions under which CIP holds and the evidence for CIP in practice.

Suggested Citation

  • C. Emre Alper & Oya Pinar Ardic, 2010. "covered interest parity," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
  • Handle: RePEc:pal:dofeco:v:4:year:2010:doi:3823
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    File URL: http://www.dictionaryofeconomics.com/article?id=pde2010_C000614
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    References listed on IDEAS

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    1. Steven Brams & Peter Fishburn, 2005. "Going from theory to practice: the mixed success of approval voting," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 25(2), pages 457-474, December.
    2. Jean-François Laslier & Karine Straeten, 2008. "A live experiment on approval voting," Experimental Economics, Springer;Economic Science Association, vol. 11(1), pages 97-105, March.
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    4. Donald Saari & Jill Newenhizen, 1988. "The problem of indeterminacy in approval, multiple, and truncated voting systems," Public Choice, Springer, vol. 59(2), pages 101-120, November.
    5. repec:cup:apsrev:v:72:y:1978:i:03:p:831-847_15 is not listed on IDEAS
    6. repec:cup:apsrev:v:78:y:1984:i:04:p:952-958_25 is not listed on IDEAS
    7. Fishburn, Peter C., 1978. "Axioms for approval voting: Direct proof," Journal of Economic Theory, Elsevier, vol. 19(1), pages 180-185, October.
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    Citations

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    Cited by:

    1. Ian Martin, 2011. "The Forward Premium Puzzle in a Two-Country World," NBER Working Papers 17564, National Bureau of Economic Research, Inc.
    2. Andrew Ang & Allan Timmermann, 2012. "Regime Changes and Financial Markets," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 313-337, October.
    3. Massimo Guidolin & Francesca Rinaldi, 2013. "Ambiguity in asset pricing and portfolio choice: a review of the literature," Theory and Decision, Springer, vol. 74(2), pages 183-217, February.
    4. Charles Engel, 2011. "The Real Exchange Rate, Real Interest Rates, and the Risk Premium," NBER Working Papers 17116, National Bureau of Economic Research, Inc.
    5. Kotaro Ishi & Kenji Fujita & Mark R. Stone, 2011. "Should Unconventional Balance Sheet Policies Be Added to the Central Bank toolkit? a Review of the Experience so Far," IMF Working Papers 11/145, International Monetary Fund.
    6. Riané de Bruyn & Rangan Gupta & Lardo Stander, 2013. "Testing the Monetary Model for Exchange Rate Determination in South Africa: Evidence from 101 Years of Data," Contemporary Economics, University of Finance and Management in Warsaw.
    7. Tze-Haw Chan & Chee-Wooi Hooy & Ahmad Zubaidi Baharumshah, 2012. "A structural VARX modelling of international parities between China and Japan in the liberalization era," Economics Bulletin, AccessEcon, vol. 32(1), pages 730-736.

    More about this item

    Keywords

    CIP; counterparty risk; emerging markets; foreign exchange;

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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