Covered interest rate parity in emerging markets

Frank S. Skinner and Andrew Mason

International Review of Financial Analysis, 2011, vol. 20, issue 5, 355-363

Abstract: This paper finds that while covered interest rate parity holds for large and small triple A rated economies, it holds for emerging markets only for a three-month maturity. For a five-year horizon the size and frequency of violations lead to the conclusion that covered interest rate parity does not hold for longer maturities for Brazil, Chile, Russia and South Korea. Overall this paper finds that aspects of credit risk are the source of violations in CIRP in the long-term capital markets rather than transactions costs or the size of the economy.

Keywords: Covered interest rate parity; CDS; Credit risk (search for similar items in EconPapers)
JEL-codes: E43 G12 G15 G24 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (21)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:20:y:2011:i:5:p:355-363

DOI: 10.1016/j.irfa.2011.06.008

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