Testing for long horizon UIP using PPP-based exchange rate expectations
نویسنده
چکیده
This paper revisits the uncovered interest parity relation. It supplements existing work in two ways: It focuses on long instead of short-term interest rates, and, related to that, employs exchange rate expectations derived from purchasing power parity (PPP) instead of actual outcomes. Among the major ̄oating currencies over the period 1975± 1997, the paper cannot support the notion of further increases in UIP-validation beyond that associated with the wave of ®nancial market liberalization and deregulation in the early 1980s. Ó 2001 Elsevier Science B.V. All rights reserved. JEL classi®cation: E43; E44
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