Abstract
Exchange Rate Parities and Taylor Rule Deviations
Highlights
Two well-known puzzles in international finance arise as a result of the apparent failure of many empirical models to find support for either the PPP (Purchasing Power Parity) or the UIP (Uncovered Interest Rate Parity) relations
We estimate a Threshold vector error correction model (VECM) (TVECM), where the threshold variable is given by deviations from the Taylor rule since these are an important indicator of central bank credibility and could affect the adjustment towards the long-run equilibrium
The aim of this paper is to provide new evidence on the empirical validity of PPP and UIP by taking into account possible nonlinearities and investigating the role of Taylor rule deviations under alternative monetary policy frameworks
Summary
Two well-known puzzles in international finance arise as a result of the apparent failure of many empirical models to find support for either the PPP (Purchasing Power Parity) or the UIP (Uncovered Interest Rate Parity) relations. We are grateful to two anonymous referees for their helpful comments and suggestions
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
