Citation

Discussion Paper Details

Please find the details for DP2943 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Uncovered Interest Parity in Crisis: The Interest Rate Defence in the 1990s

Author(s): Robert P Flood and Andrew K Rose

Publication Date: September 2001

Keyword(s): developed, developing, empirical, exchange rate, fixed and floating

Programme Area(s): International Macroeconomics

Abstract: This Paper tests for uncovered interest parity (UIP) using daily data for twenty-three developing and developed countries through the crisis-strewn 1990s. We find that UIP works better on average in the 1990s than in previous eras in the sense that the slope coefficient from a regression of exchange rate changes on interest differentials yields a positive coefficient (which is sometimes insignificantly different from unity). UIP works systematically worse for fixed and flexible exchange rate countries than for crisis countries, but we find no significant differences between rich and poor countries. Finally, we find evidence that varies considerably across countries and time, but is usually weakly consistent with an effective ?interest rate defense? of the exchange rate.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2943

Bibliographic Reference

Flood, R and Rose, A. 2001. 'Uncovered Interest Parity in Crisis: The Interest Rate Defence in the 1990s'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2943