Monetary policy implementation and uncovered interest parity: empirical evidence from Oceania
The close integration of Australian and New Zealand financial markets and the similarity of the monetary policy regimes provide the perfect backdrop for testing the empirical relevance of uncovered interest rate parity (UIP) in Oceania. We find that changes in the bilateral exchange rate have become more sensitive to the short-term interest differential over time. Most important, after the introduction of the Official Cash Rate regime in New Zealand, the responsiveness of the exchange rate has accelerated to such an extent that it is incompatible with UIP. Evidence on UIP over longer horizons is mixed with a 10-year horizon providing the strongest support for the theory since 1990.
|Date of creation:||01 Jun 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 64 3 369 3123 (Administrator)
Fax: 64 3 364 2635
Web page: http://www.econ.canterbury.ac.nz
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alexius, Annika, 2001. "Uncovered Interest Parity Revisited," Review of International Economics, Wiley Blackwell, vol. 9(3), pages 505-17, August.
- Razzak, W A, 2002. "The Forward Rate Unbiasedness Hypothesis Revisited," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(4), pages 293-308, October.
- James R. Lothian & Liuren Wu, 2003.
"Uncovered Interest Rate Parity Over the Past Two Centuries,"
- Lothian, James R. & Wu, Liuren, 2011. "Uncovered interest-rate parity over the past two centuries," Journal of International Money and Finance, Elsevier, vol. 30(3), pages 448-473, April.
- Guthrie, Graeme & Wright, Julian, 2000. "Open mouth operations," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 489-516, October.
- Gabriele Galati & Michael Melvin, 2004. "Why has FX trading surged?," BIS Quarterly Review, Bank for International Settlements, December.
- Guender, Alfred V. & Oh, Do Yoon, 2006. "Price stability through price-level targeting or inflation targeting? A tale of two experiments," Journal of Economics and Business, Elsevier, vol. 58(5-6), pages 373-391.
- David Archer & Andy Brookes & Michael Reddell, 1999. "A cash rate system for implementing monetary policy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 62, March.
When requesting a correction, please mention this item's handle: RePEc:cbt:econwp:10/71. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Albert Yee)
If references are entirely missing, you can add them using this form.