UIP, the Carry Trade and Minsky’s Financial Instability Hypothesis in the CEE and CIS

Robert Hayward and Jens Hölscher

Chapter 7 in Poland and the Eurozone, 2014, pp 111-138 from Palgrave Macmillan

Abstract: Abstract The carry trade is the attempt to take advantage of deviations from uncovered interest parity (UIP). UIP asserts that, given the free flow of capital, the expected change in an exchange rate over a specific period should be equal to the interest rate differential for the two currencies for the same period. If this is not the case, there is an opportunity to make an abnormal return, using the carry trade, by borrowing a low interest-rate currency and investing the proceeds in one where rates are relatively high. A large body of evidence suggests that UIP does not hold.

Keywords: Exchange Rate; Interest Rate; Abnormal Return; Risk Premium; Forward Rate (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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: https://EconPapers.repec.org/RePEc:pal:stuchp:978-1-137-42641-3_7

Ordering information: This item can be ordered from
http://www.palgrave.com/9781137426413

DOI: 10.1057/9781137426413_7

Access Statistics for this chapter

More chapters in Studies in Economic Transition from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().