Exchange rates and long-term bonds

Annika Alexius () and Peter Sellin ()
Additional contact information
Peter Sellin: Sveriges Riksbank, Postal: 103 37 Stockholm, Sweden

No 2002:7, Working Paper Series from Uppsala University, Department of Economics

Abstract: Tentative evidence suggests that the empiricalfailure of uncovered interest parity (UIP) is confined to short-term interest rates. Tests of UIP for long-term interest rates are however hampered by various data problems. By focusing on short investments in long-term bonds, these data problems can be avoided. We study the relationship between the US dollar - Deutsch Mark exchange rate and German and American bond rates. The hypothesis that expected returns to investments in bonds denominated in the two currencies are equal cannot be rejected. This result is not simply due to low power as the beta-coefficients are close to unity. For the corresponding short-term interest rates, the typical finding of a large and significantly negative beta-coefficient is confirmed.

Keywords: Long-term interest rates; exchange rates; uncovered interest parity (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk and nep-ifn
Date: 2002-04-15, Revised 2006-03
View list of references View citations in EconPapers

Downloads: (external link)
http://www.nek.uu.se/pdf/wp2002_7.pdf (application/pdf)
http://www.nek.uu.se//Pdf/wp2002_7rev.pdf Revised Working paper (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:hhs:uunewp:2002_007

Access Statistics for this paper

More papers in Working Paper Series from Uppsala University, Department of Economics
Address: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Contact information at EDIRC.
Series data maintained by Katarina Grönvall ().