 Covered interest rate parity deviations, COVID-19 pandemic infection cases, and vaccinationYu-Lun Chen, Yi-Hua Li, Wan-Shin Mo and J. Jimmy Yang Journal of International Financial Markets, Institutions and Money, 2025, vol. 99, issue C Abstract: This study explores the impact of the COVID-19 pandemic on deviations from covered interest rate parity (CIP) for G10 currencies. We find that a higher number of COVID-19 infection cases and a higher stringency index, which captures the strictness of policies and government interventions, are associated with larger CIP deviations. However, this relation disappears after COVID-19 vaccines became available. This finding indicates that vaccines not only represent a significant advancement in combating the coronavirus but also contribute to improving efficiency in the FX market by mitigating uncertainty and stabilizing economic conditions. Furthermore, we find that the rise of the U.S. dollar during the COVID-19 pandemic contributes to persistent deviations from CIP. Keywords: Covered interest rate parity (CIP); COVID-19 pandemic; Stringency index; Cross-currency basis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:99:y:2025:i:c:s1042443125000125 DOI: 10.1016/j.intfin.2025.102122 Access Statistics for this article Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely More articles in Journal of International Financial Markets, Institutions and Money from Elsevier |
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