Uncovering uncovered interest parity during the classical gold standard era, 1888-1905

Andrew Coleman ()
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Andrew Coleman: Motu Economic and Public Policy Research

No 10_02, Working Papers from Motu Economic and Public Policy Research

Abstract: This paper examines the uncovered interest parity hypothesis using the dollar-sterling exchange rate during the gold standard era. This period is interesting because the exchange rate was seasonal, because transactions costs were high, and because occasions when uncovered interest rate speculation did not occur can be identified. The paper shows UIP speculation frequently did not occur, that speculation occurred more in response to expected exchange rate changes than interest rate differentials, and that profitability varied systematically with interest rate differentials. The estimated UIP equations are substantially improved by distinguishing occasions when sterling was borrowed not lent.

Keywords: Uncovered interest parity; gold standard (search for similar items in EconPapers)
JEL-codes: F31 N21 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2010-02
New Economics Papers: this item is included in nep-his, nep-ifn and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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