PPP, RANDOM WALKS, AND UIP AFTER INTEREST RATE LIBERALISATION IN A SMALL DEVELOPING ECONOMY

José Sánchez-Fung and Peter A. Prazmowski ()
Additional contact information
Peter A. Prazmowski: Central Bank of the Dominican Republic

Economics Bulletin, 2004, vol. 6, issue 1, 1-7

Abstract: This paper investigates the impact of interest rate liberalisation on exchange rate expectations in the Dominican Republic (DR). The research employs a nested purchasing power parity, random walk, and uncovered interest parity specification that facilitates the recovery of the fundamentals behind the exchange rate expectations formation mechanism. The findings reveal that the most significant driver of exchange rate expectations is the interest rate differential between the DR and its main trading partner -the United States. These results are of relevance for the design and implementation of financial reforms and exchange rate policy alike, and in anticipating abrupt exchange rate movements.

JEL-codes: E4 F4 (search for similar items in EconPapers)
Date: 2004-01-26
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.accessecon.com/pubs/EB/2004/Volume6/EB-03F40001A.pdf (application/pdf)

Related works:
Working Paper: PPP, random walks, and UIP after interest rate liberalisation in a small developing economy (2003)
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:ebl:ecbull:eb-03f40001

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().