TY  - JOUR
AU  - Chinn,Menzie D.
AU  - Quayyum,Saad
TI  - Long Horizon Uncovered Interest Parity Re-Assessed
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18482
PY  - 2012
Y2  - October 2012
UR  - http://www.nber.org/papers/w18482
L1  - http://www.nber.org/papers/w18482.pdf
N1  - Author contact info:
Menzie D. Chinn
Department of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI 53706
Tel: 608/262-7397
Fax: 608/262-2033
E-Mail: mchinn@lafollette.wisc.edu

Saad Quayyum
Dept. of Economics
1180 Observatory Drive
Madison, WI  53706
E-Mail: quayyum@wisc.edu
AB  - 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.
ER  -