Three Parity Conditions in International Finance

Richard C. Marston
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Richard C. Marston: University of Pennsylvania

Chapter 14 in Open-Economy Macroeconomics, 1993, pp 257-271 from Palgrave Macmillan

Abstract: Abstract International finance often focuses on parity conditions linking financial or goods markets in different countries. The integration between financial markets is often measured by deviations from uncovered interest parity (UIP) as in Cumby and Obstfeld (1984) and Frankel and MacArthur (1988). Similarly, the integration between goods markets is often measured by deviations from purchasing power parity as in Roll (1979) and Adler and Lehmann (1983). This study presents new evidence on both sets of parity conditions using a monthly data set spanning over twenty-five years. This data set is also used to interpret ‘real interest parity’ (RIP), another form of interest parity often cited as evidence of financial market integration.

Keywords: Forecast Error; Real Interest Rate; Political Risk; Capital Control; Lending Rate (search for similar items in EconPapers)
Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:pal:intecp:978-1-349-12884-6_14

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DOI: 10.1007/978-1-349-12884-6_14

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