NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Covered Interest Arbitrage: Then vs. Now

Ted Juhl, William Miles, Marc D. Weidenmier

NBER Working Paper No. 10961
Issued in December 2004
NBER Program(s):   DAE   IFM

We introduce a new weekly database of spot and forward US-UK exchange rates as well as interest rates to examine the integration of forward exchange markets during the classical gold standard period (1880-1914). Using threshold autoregressions (TAR), we estimate the transactions cost band of covered interest differentials (CIDs) and compare our results to studies of more recent periods. Our findings indicate that CIDs for the US-UK rate were generally larger during the classical gold standard than any period since. We argue that slower information and communications technology during the gold standard period led to fewer short-term financial flows, higher transactions costs, and larger CIDs.

download in pdf format
   (410 K)

email paper

This paper is available as PDF (410 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: Juhl, Ted, William Miles and Marc D. Weidenmier. "Covered Interest Arbitrage: Then Versus Now," Economica, 2006, v73(290,May), 341-352.

Users who downloaded this paper also downloaded these:
Lizondo Interest Differential and Covered Arbitrage
Eaton and Turnovsky w0984 Covered Interest Parity, Uncovered Interest Parity, and Exchange Rate Dynamics
Canjels, Prakash-Canjels, and Taylor w10583 Measuring Market Integration: Foreign Exchange Arbitrage and the Gold Standard, 1879-1913
Ito w1187 Capital Controls and Covered Interest Parity
Cumby and Obstfeld International Interest Rate and Price Level Linkages under Flexible Exchange Rates: A Review of Recent Evidence
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us