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Title: CIP Deviations, the Dollar, and Frictions in International Capital Markets

Author(s): Wenxin Du and Jesse Schreger

Publication Date: May 2021

Keyword(s):

Programme Area(s): Financial Economics, International Macroeconomics and Finance and Monetary Economics and Fluctuations

Abstract: The covered interest rate parity (CIP) condition is a fundamental arbitrage relationship in international finance. In this chapter, we review its breakdown during the Global Financial Crisis and its continued failure in the subsequent decade. We review how to measure CIP deviations, discuss the drivers of CIP deviations, and the implications of CIP deviations for global financial markets.

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Bibliographic Reference

Du, W and Schreger, J. 2021. 'CIP Deviations, the Dollar, and Frictions in International Capital Markets'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=16124