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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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    Citations

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    Cited by:

    1. 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.
    2. Ian Martin, 2011. "The Forward Premium Puzzle in a Two-Country World," NBER Working Papers 17564, National Bureau of Economic Research, Inc.
    3. 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 Economics and Human Sciences in Warsaw., vol. 7(1), March.
    4. Andrew Ang & Allan Timmermann, 2012. "Regime Changes and Financial Markets," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 313-337, October.
    5. Kotaro Ishi & Mr. Kenji Fujita & Mr. 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 2011/145, International Monetary Fund.
    6. Charles Engel, 2011. "The Real Exchange Rate, Real Interest Rates, and the Risk Premium," NBER Working Papers 17116, National Bureau of Economic Research, Inc.
    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;
    All these keywords.

    JEL classification:

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

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