Interest rate parity and the foreign exchange market

2018 ◽  
pp. 59-70
Author(s):  
Francisco Carrada-Bravo
Keyword(s):  
Interest Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Exchange Market ◽  
Interest Rate Parity ◽  
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.

scholarly journals Currency Market Efficiency Revisited: Evidence from Korea

2019 ◽  
Vol 7 (3) ◽  
pp. 52
Author(s):  
Kang
Keyword(s):  
Interest Rate ◽  
Market Efficiency ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Central Banks ◽  
Forward Rate ◽  
Exchange Market ◽  
Interest Rate Parity ◽  
Currency Market ◽  
Rate Parity

Keywords: foreign exchange market efficiency; forward rate unbiased hypothesis; covered interest rate parity; central banks; central banks’ policies

scholarly journals Deviations From Covered Interest Rate Parity: Evaluating Drivers for Changes

2020 ◽  
Vol 4 (2) ◽  
pp. 1-1
Author(s):  
Fernando Chertman
Keyword(s):  
Interest Rate ◽  
Literature Review ◽  
Foreign Exchange Market ◽  
Extensive Literature ◽  
Exchange Market ◽  
Interest Rate Parity ◽  
No Arbitrage ◽  
Related Literature ◽  
Rate Parity ◽  
New Perspective

This paper evaluates the deviation from covered interest rate parity (CIP) after the great financial crisis. As a new phenomenon, this deviation has been approached both theoretically (violating the no arbitrage condition) and empirically. Through an extensive literature review, this study maps the possible drivers of the deviation and their proxies. We apply the analysis on a set of countries that are not yet explored in the related literature so far, even though represent a significant part of the foreign exchange market. Regarding the results, a significant weight in the financial drivers is obtained. The result claims for a deeper analysis and opens the possibility to evaluate this phenomenon under a new perspective.      

How the Federal Reserve's Central Bank Swap Lines Have Supported U.S. Corporate Borrowers in the Leveraged Loan Market

FEDS Notes ◽  
2020 ◽  
Vol 2020 (2802) ◽  
Author(s):  
Annie McCrone ◽  
◽  
Ralf Meisenzahl ◽  
Friederike Niepmann ◽  
Tim Schmidt-Eisenlohr ◽  
...  
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Foreign Exchange ◽  
Federal Reserve ◽  
Central Banks ◽  
Interest Rate Parity ◽  
Monetary Authorities ◽  
Rate Parity ◽  
In The Beginning ◽  
The Cost

The cost of borrowing U.S. dollars through foreign exchange (FX) swap markets increased significantly in the beginning of the Covid-19 pandemic in February 2020, indicated by larger deviations from Covered Interest Rate Parity (CIP). CIP deviations narrowed again when the Federal Reserve expanded its swap lines to support U.S. dollar liquidity globally—by enhancing and extending its swap facility with foreign central banks and introducing the new temporary Foreign and International Monetary Authorities (FIMA) repurchase agreement facility.

The Floating Dollar in the Greenback Period: A Test of Theories of Exchange-Rate Determination

1981 ◽  
Vol 41 (3) ◽  
pp. 629-650 ◽  
Author(s):  
Lawrence H. Officer
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Foreign Exchange ◽  
Purchasing Power Parity ◽  
Foreign Exchange Market ◽  
Purchasing Power ◽  
Exchange Market ◽  
Power Parity ◽  
Exchange Rate Determination ◽  
Income Effects

Some leading modern theories of exchange-rate determination are pitted against each other in explaining fundamental movements of the freely floating U.S. dollar in the foreign-exchange market during the greenback period, 1862–1878. A purchasing-power-parity theory augmented to incorporate interest-rate, and possibly income, effects provides the best explanation of the exchange rate. The standard works on the greenback period are subject to some amendments in light of the study.

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