Co-Movements in Long-Term Interest Rates and the Role of PPP-Based Exchange Rate Expectations
Author | : Jan Marc Berk |
Publisher | : International Monetary Fund |
Total Pages | : 29 |
Release | : 1999-06-01 |
ISBN-10 | : 9781451850345 |
ISBN-13 | : 1451850344 |
Rating | : 4/5 (344 Downloads) |
Download or read book Co-Movements in Long-Term Interest Rates and the Role of PPP-Based Exchange Rate Expectations written by Jan Marc Berk and published by International Monetary Fund. This book was released on 1999-06-01 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates international co-movement in bond yields by testing for uncovered interest parity (UIP). Existing work is supplemented by focusing on long instead of short-term interest rates and by employing exchange rate expectations derived from purchasing power parity (PPP) instead of actual outcomes. Among the major currencies during 1975-97, the paper does not find a further increase in co-movement beyond that associated with the wave of financial market liberalization in the early 1980s. Given the similarity between PPP-based UIP tests and those employing actual exchange rate outcomes, the value added of the former lies mainly with data availability.