The Economics of Uncovered Interest Parity Condition for Emerging Markets: A Survey

C. Emre Alper (), Oya Pınar Ardıç () and Salih Fendoglu ()

MPRA Paper from University Library of Munich, Germany

Abstract: Financial account liberalizations since the second half of the 1980s paved way for the burgeoning literature that investigates foreign exchange market efficiency in emerging markets via testing for the uncovered interest parity (UIP) condition. This paper provides a broad and critical survey on this recent literature as well as a general understanding on the topic through reviewing the related literature on developed economies where recent methodological advances in time series econometrics have provided favorable results, questioning the previously documented UIP puzzle. The literature on emerging markets suggests that these countries deserve a special treatment by taking into account the existence of additional types of risk premia, high inflation episodes, financial contagion, peso problem, simultaneity problem, asymmetricity, and the determination of de facto structural breaks.

Keywords: Uncovered Interest Parity; Forward Premium Bias; Emerging Markets. (search for similar items in EconPapers)
JEL-codes: F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-ifn and nep-mon
Date: 2007-05-30
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Related works:
Working Paper: The Economics of Uncovered Interest Parity Condition for Emerging Markets: A Survey (2007)
Journal Article: the economics of the uncovered interest parity condition for emerging markets
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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:4079

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