NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Long Horizon Uncovered Interest Parity Re-Assessed

Menzie D. Chinn, Saad Quayyum

NBER Working Paper No. 18482
Issued in October 2012
NBER Program(s):   IFM

We review the evidence for both short and long horizon uncovered interest parity (UIP) and rational expectations over the period up to 2011, extending the sample examined in Chinn and Meredith (2004) by nearly a decade. We find that the joint hypothesis of UIP and rational expectations (known as the unbiasedness hypothesis) holds better at long horizons than at short, although the effect is somewhat weaker than documented in Chinn and Meredith (2004). Using the formula for the slope coefficient, we identify potential sources for the difference in slope coefficients at different horizons. We attribute our weaker findings for long horizon unbiasedness for certain currencies partly to the advent of extraordinarily low interest rates associated with the zero interest bound in Japan and Switzerland.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18482

Users who downloaded this paper also downloaded these:
Backus, Gavazzoni, Telmer, and Zin w16218 Monetary Policy and the Uncovered Interest Parity Puzzle
Gorton and Metrick w18455 Who Ran on Repo?
Engel w17116 The Real Exchange Rate, Real Interest Rates, and the Risk Premium
Hong, Kubik, and Scheinkman w18476 Financial Constraints on Corporate Goodness
Meredith and Chinn w6797 Long-Horizon Uncovered Interest Rate Parity
 
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