Does Interest Rate Parity Hold Good for INR-USD Exchange Rate? Analysing via Computational Technique

2022 ◽  
pp. 122-128
Author(s):  
Abhay Kumar ◽  
Mahendra Parihar ◽  
Aman Devariya ◽  
Anushka Khanna ◽  
Svarna Khande ◽  
...  
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Computational Technique ◽  
Interest Rate Parity ◽  
Rate Parity ◽  
Good For

scholarly journals Exchange Rate Policies at the Zero Lower Bound

2019 ◽  
Vol 87 (4) ◽  
pp. 1605-1645 ◽  
Author(s):  
Manuel Amador ◽  
Javier Bianchi ◽  
Luigi Bocola ◽  
Fabrizio Perri
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Lower Bound ◽  
Exchange Rate Policy ◽  
Monetary Authority ◽  
Zero Lower Bound ◽  
Foreign Reserves ◽  
Interest Rate Parity ◽  
Covered Interest Parity ◽  
Rate Parity

Abstract We study the problem of a monetary authority pursuing an exchange rate policy that is inconsistent with interest rate parity because of a binding zero lower bound constraint. The resulting violation in interest rate parity generates an inflow of capital that the monetary authority needs to absorb by accumulating foreign reserves. We show that these interventions by the monetary authority are costly, and we derive a simple measure of these costs: they are proportional to deviations from the covered interest parity (CIP) condition and the amount of accumulated foreign reserves. Our framework can account for the recent experiences of “safe-haven” currencies and the sign of their observed deviations from CIP.

Financial Liberalization and Tests of Capital Flow Mobility in Taiwan

2001 ◽  
Vol 04 (04) ◽  
pp. 427-461 ◽  
Author(s):  
Yin K. Wen
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Capital Mobility ◽  
Financial Liberalization ◽  
Capital Flow ◽  
Financial Policies ◽  
Interest Rate Parity ◽  
Rate Parity ◽  
Flow Mobility ◽  
The Government

Taiwan's financial policies played a vital role in promoting its relatively rapid post-war industrialization, a process that involved the use of different financial strategies to accommodate different stages of economic development. This paper aims to examine the process of Taiwan's financial liberalization and the relationship of this process to the opening up of Taiwan's capital account, which can be viewed as the last reform stage for the entire financial liberalization process. The first section briefly introduces the evolution of Taiwan's financial policies during different stages of development, giving primary focus to her efforts at financial liberalization starting in the 1980s. During this period, mid-1987, the time when Taiwan's government promulgated a new law to deregulate foreign exchange control, counts as a watershed for Taiwan's exchange rate market. The second section uses the conventional interest rate parity method to compare the extent of capital flow mobility before and after mid-1987. The results of the comparison show only a slight improvement in capital flow mobility after mid-1987. The author argues that the interest rate parity method may, for various reasons, be inadequate for testing capital mobility in Taiwan's case. Evidence, in the form of measures that the Taiwan's government has taken over time as described in the first section and Appendix, shows that Taiwan's financial markets have become increasingly open and more market-oriented as the financial liberalization process progresses. Although the government is still intervening in both interest rate and exchange rate markets, the trend is toward less intervention, except for a brief period during the 1998-99 Asian Financial Crisis. The final section presents a brief conclusion and directions for further research.

scholarly journals Exchange Rate Volatility and Uncovered Interest Rate Parity in the European Emerging Economies

2016 ◽  
Vol 25 (3) ◽  
pp. 253-270 ◽  
Author(s):  
Dejan Živkov ◽  
Jovan Njegić ◽  
Mirela Momčilović ◽  
Ivan Milenković
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Emerging Economies ◽  
Exchange Rate Volatility ◽  
Interest Rate Parity ◽  
Uncovered Interest Rate Parity ◽  
Rate Parity
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