PPP, random walks, and UIP after interest rate liberalisation in a small developing economy

José Sánchez-Fung and Peter A. Prazmowski
Additional contact information
Peter A. Prazmowski: Central Bank of the Dominican Republic

No 2003-6, Economics Discussion Papers from School of Economics, Kingston University London

Abstract: This paper investigates the impact of interest rate liberalisation on exchange rate expectations in the Dominican Republic (DR). The research employs a nested purchasing power parity, random walk, and uncovered interest parity specification that facilitates the recovery of the fundamentals behind the exchange rate expectations formation mechanism. The findings reveal that the most significant driver of exchange rate expectations is the interest rate differential between the DR and its main trading partner -the United States. These results are of relevance for the design and implementation of financial reforms and exchange rate policy alike, and in anticipating abrupt exchange rate movements.

Keywords: Interest rate liberalisation; exchange rate expectations; PPP/UIP; Dominican Republic. (search for similar items in EconPapers)
JEL-codes: F41 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2003-07-01
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://eprints.kingston.ac.uk/6655/1/Sanchez-Fung-J-6655.pdf Full text (application/pdf)

Related works:
Journal Article: PPP, RANDOM WALKS, AND UIP AFTER INTEREST RATE LIBERALISATION IN A SMALL DEVELOPING ECONOMY (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:kngedp:2003_006

Access Statistics for this paper

More papers in Economics Discussion Papers from School of Economics, Kingston University London Kingston University London, School of Economics, Penrhyn Road, Kingston upon Thames, Surrey, KT1 2EE, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Andrea Ingianni ().