Purchasing power parity vs. uncovered interest rate parity for NAFTA countries: The value of incorporating time-varying parameter model

This study is an attempt to examine whether the deviations of purchasing power parity and uncover interest rate parity Granger-cause the 1997 Asian financial crisis by using vector autoregression and Granger causality tests. The results show that the purchasing power parity and uncover interest rate parity do not hold for most Asian markets. We find weak evidence to support that the deviations of purchasing power parity and uncover interest rate parity have the power to explicate the origin of the financial crisis.

Download Full-text

PENGARUH PARITAS DAYA BELI DAN PARITAS SUKU BUNGA, TERHADAP NILAI TUKAR RUPIAH TERHADAP DOLLAR AMERIKA SERIKAT

IQTISHODUNA ◽

10.18860/iq.v0i0.4839 ◽

2018 ◽

pp. 55-70

Author(s):

Robiatul Adhawiyah ◽

Maretha Ika Prajawati ◽

Rieza Firdian

Keyword(s):

Exchange Rate ◽

Interest Rate ◽

Purchasing Power Parity ◽

Real Interest Rate ◽

Purchasing Power ◽

Fisher Effect ◽

Power Parity ◽

Interest Rate Parity ◽

Us Dollar ◽

Rate Parity

The exchange rate will react against change of inflation and interest rate, at least there are three theories that explain the relationship between inflation, interest rate, and exchange rate, namely purchasing power parity, interest rate parity, and international fisher effect. The purpose of this study was to determine the influence of purchasing power parity, interest rate parity, and international fisher effect on the Rupiah exchange rate against US Dollar. The populations in this research included inflation time series data, nominal interest rate, real interest rate, and Rupiah exchange rate. The data used in is secondary data form the inflation report, nominal interest rate, real interest rate, and Rupiah exchange rate quarterly. The independent variable used purchasing power parity, interest rate parity, and international fisher effect,the dependent variable used the Rupiah exchange rate against US Dollar. The result of this study indicated that the purchasing power parity, interest rate parity simultaneously had a significant influence on the exchange rate of Rupiah/US Dollar.

Download Full-text

Currency Futures: Some Implications For International Financial Management

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v3i3.6516 ◽

2011 ◽

Vol 3 (3) ◽

pp. 62

Author(s):

Russ Ray

Keyword(s):

Interest Rate ◽

Purchasing Power Parity ◽

Financial Management ◽

Capital Budgeting ◽

Purchasing Power ◽

Power Parity ◽

Interest Rate Parity ◽

Currency Futures ◽

Efficient Hedging ◽

Rate Parity

This paper tests the contemporary currency futures market for interest-rate parity, purchasing-power parity, market efficiency, and hedging effectiveness. The study finds that the currency futures markets is a highly efficient, hedging-effective market exhibiting significant degrees of interest-rate parity and (longer-term) purchasing-power parity. Finally, the study infers from such findings some practicable policy tools for international cash management, multi-country capital budgeting, currency forecasting, and the risk management of foreign exchange exposure.

Download Full-text