Modeling Interest Rate Parity: A System Dynamics Approach

John Harvey

No 200502, Working Papers from Texas Christian University, Department of Economics

Abstract: The purpose of this paper is to show the superiority of Keynes’ approach by comparing three system dynamics models of the relationship among interest and exchange rates: one based on traditional uncovered interest rate parity, one with risk, and one with forecast confidence. It will be demonstrated that only the last produces patterns consistent with those observed in the real world.

Keywords: exchange rates; interest rate parity; system dynamics; institutionalist (search for similar items in EconPapers)
JEL-codes: C63 F21 F31 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2005-09
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Citations: View citations in EconPapers (4)

Published in Journal of Economic Issues, June 2006, pages 395-403

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http://www.econ.tcu.edu/RePEc/tcu/wpaper/wp05-02.pdf First version, 2005 (application/pdf)

Related works:
Journal Article: Modeling Interest Rate Parity: A System Dynamics Approach (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:tcu:wpaper:200502

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