Extreme support for uncovered interest parity

R. Huisman, K. Koedijk, C. Kool, F. Nissen

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Concerning UIP, the common conclusion is that it may be valid but undetectable for many reasons. In this paper we take a complementary route in that we base our methodology on a random time effects panel model that controls for various biasing factors and which is invariant to the choice of the numeraire currency. We show that the rejection of UIP is not as severe as is commonly found and that it almost perfectly holds in periods where the forward premiums are large.
Original languageEnglish
Pages (from-to)211-228
JournalJournal of International Money and Finance
Volume17
Issue number1
DOIs
Publication statusPublished - 19 Feb 1998
Externally publishedYes

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