Implications of Volatility for Uncovered Interest Parity Testing

Alexandra Horobet, Sorin Dumitrescu and Dan Gabriel Dumitrescu

Chapter 12 in Money, Banking and Financial Markets in Central and Eastern Europe, 2010, pp 253-275 from Palgrave Macmillan

Abstract: Abstract The concept of interest rate parity is an important component of the macroeconomic analysis for open economies and one of the basic models used in international finance. The validation of interest parity has important implications for both international corporate finance decisions and international investments. Interest rate parity has been developed in two forms, known as covered interest parity (CIP) and uncovered interest parity (UIP), which provide simple relationships between money market variables, more specifically interest rates, and foreign exchange market prices.

Keywords: Exchange Rate; Interest Rate; Market Volatility; Foreign Exchange Market; Exchange Rate Volatility (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-0-230-30221-1_12

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DOI: 10.1057/9780230302211_12

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