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Another look at long-horizon uncovered interest parity

Listed author(s):
  • Antonio MontanÈs
  • Marcos Sanso-Navarro

Long-horizon uncovered interest parity during the post-Bretton Woods era in the G7 countries is analyzed in this paper. The main dißerence with previous studies relies in the use of cointegration methods due to the non-stationary behavior of the variables involved. Moreover, the consideration of structural breaks becomes a key element for this relationship to hold. These shifts are identi.ed as sharp changes in the time-varying risk premium as a consequence of turning points in monetary policy and exchange rates regimes. Finally, the robustness of the obtained results to recent developments in the Eurozone is checked.

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Paper provided by FEDEA in its series Studies on the Spanish Economy with number 221.

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Handle: RePEc:fda:fdaeee:221
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