Monetary policy implementation and uncovered interest parity: empirical evidence from Oceania

Alfred Guender and Bevan Cook
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Bevan Cook: Reserve Bank of New Zealand, http://www.rbnz.govt.nz

No DP2010/12, Reserve Bank of New Zealand Discussion Paper Series from Reserve Bank of New Zealand

Abstract: The close integration of Australian and New Zealand financial markets and the similarity of the monetary policy regimes provide the perfect backdrop for testing the empirical relevance of uncovered interest rate parity (UIP) in Oceania. We find that changes in the bilateral exchange rate have become more sensitive to the short-term interest differential over time. Most important, after the introduction of the Official Cash Rate regime in New Zealand, the responsiveness of the exchange rate has accelerated to such an extent that it is incompatible with UIP. Evidence on UIP over longer horizons is mixed with a 10-year horizon since 1990 providing the strongest support for the theory.

JEL-codes: E52 F31 F36 (search for similar items in EconPapers)
Pages: 29 p.
Date: 2010-12
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-mon
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Related works:
Journal Article: Monetary policy implementation and uncovered interest parity: Empirical evidence from Oceania (2011)
Working Paper: Monetary policy implementation and uncovered interest parity: empirical evidence from Oceania (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:nzb:nzbdps:2010/12

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