The real uncovered interest parity: The case of Canada and the USA

Nikolaos Mylonidis and Suzanna-Maria Paleologou

Journal of Policy Modeling, 2011, vol. 33, issue 2, 255-267

Abstract: The aim of this paper is to re-assess the real uncovered interest parity (RUIP) in the light of including domestic demand shocks as possible determinants of the real exchange rate. We use annual data for two close trading partners, namely Canada and the USA. Using cointegration analysis we find evidence in favour of RUIP. In addition, empirical support is provided to show that discretionary fiscal policy actions have a spillover effect to the real exchange rate via real interest rates.

Keywords: Real; exchange; rate; Real; interest; rates; Cyclically; adjusted; deficits; Cointegration (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:33:y:2011:i:2:p:255-267

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