TY  - JOUR
AU  - Bekaert,Geert
AU  - Wei,Min
AU  - Xing,Yuhang
TI  - Uncovered Interest Rate Parity and the Term Structure
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8795
PY  - 2002
Y2  - February 2002
UR  - http://www.nber.org/papers/w8795
L1  - http://www.nber.org/papers/w8795.pdf
N1  - Author contact info:
Geert Bekaert
Graduate School of Business
Columbia University
3022 Broadway, 411 Uris Hall
New York, NY 10027
Tel: 212/854-9156
Fax: 212/662-8474
E-Mail: gb241@columbia.edu

Min Wei
Federal Reserve Board
Division of Monetary Affairs
Mail stop 74
Washington, DC 20551
E-Mail: min.wei@frb.gov

Yuhang Xing
Columbia University
Jones School of Management, MS 531
Rice  University
6100 Main Street
Houston, TX 77004
Tel: 7133484167
E-Mail: yxing@rice.edu
AB  - This paper examines uncovered interest rate parity (UIRP) and the expectations hypotheses of the term structure (EHTS) at both short and long horizons.  The statistical evidence against UIRP is mixed and is currency- not horizon-dependent. Economically, the deviations from UIRP are less pronounced than previously documented.  The evidence against the EHTS is statistically more uniform, but, economically, actual spreads and theoretical spreads (spreads constructed under the null of the EHTS) do not behave very differently, especially at long horizons.  Partly because of this, the deviations from the EHTS only play a minor role in explaining deviations from UIRP at long horizons.  A random walk model for both exchange rates and interest rates fits the data marginally better than the UIRP-EHTS model.
ER  -