Risk premia and foreign exchange: A multiple time series approach to testing uncovered interest-rate parity

1987 ◽  
Vol 123 (4) ◽  
pp. 579-591 ◽  
Author(s):  
Mark P. Taylor
Keyword(s):  
Time Series ◽  
Interest Rate ◽  
Foreign Exchange ◽  
Risk Premia ◽  
Multiple Time ◽  
Multiple Time Series ◽  
Interest Rate Parity ◽  
Uncovered Interest Rate Parity ◽  
Time Series Approach ◽  
Rate Parity

scholarly journals The Uncovered Interest Rate Parity Anomaly And Foreign Exchange Market Turnover

2012 ◽  
Vol 11 (3) ◽  
pp. 299 ◽  
Author(s):  
John F. Boschen ◽  
Kimberly J. Smith
Keyword(s):  
Interest Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Foreign Exchange Markets ◽  
Exchange Market ◽  
Interest Rate Parity ◽  
High Interest Rate ◽  
Uncovered Interest Rate Parity ◽  
Exchange Markets ◽  
Rate Parity

The uncovered interest rate parity (UIP) anomaly is that high interest rate currencies appreciate, rather than depreciate, against low interest rate currencies. We show that the UIP anomalies apparent in six major currency pairs have diminished over our 1995-2010 sample period. We further show that the observed decline in deviations from UIP is associated with the substantially higher transaction volume now present in the foreign exchange markets. We interpret our findings as consistent with the proposition that the UIP anomaly dissipates as the foreign exchange markets become more efficient.

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