Abstract

We investigate the long-term covered interest parity (CIP) relationship between the US dollar and the Japanese yen. We find that the CIP relation tends to be one way and favours those with the ability to borrow US dollars. Regression analysis reveals that negative changes in spot exchange rates, positive changes in US interest rates and negative changes in yen interest rates generally affect the deviation from parity. Evidence of declining deviations from equilibrium over the sample period is consistent with a more efficient trading environment.

Full Text
Paper version not known

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 call

Disclaimer: 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.