Uncovered Interest Parity in Central and Eastern Europe: Sample, Expectations and Structural Breaks
Cuestas, J.C., Filipozzi, F. and Staehr, K.
(2015)
Uncovered Interest Parity in Central and Eastern Europe: Sample, Expectations and Structural Breaks.
Working Paper.
Sheffield Economic Research Paper Series (SERPS), 201501
(014).
Department of Economics, University of Sheffield
ISSN 1749-8368
Abstract
This paper examines the empirical validity of the hypothesis of uncovered interest parity (UIP) using data from five Central and Eastern European countries with floating exchange rates for the period 2003-2013. The analysis includes forward-looking as well as static expectations and also allows for different types of structural breaks. The variable representing deviations from UIP is stationary when expectations are forward-looking, but typically not when expectations are static even when structural breaks are incorporated. The results underscore the importance of the assumptions when the UIP hypothesis is tested.
Metadata
Item Type:
Monograph
Authors/Creators:
Cuestas, J.C.
Filipozzi, F.
Staehr, K.
Copyright, Publisher and Additional Information:
The Sheffield Economic Research Paper Series (SERPS) offers a forum for the research output of the Department of Economics, University of Sheffield. Papers are reviewed for quality and presentation by two internal referees and a departmental editor. However, the contents and opinions expressed remain the responsibility of the author(s). Comments are welcomed and should be addressed to the individual author(s).
Keywords:
Uncovered interest parity; arbitrage; structural breaks; expectations; Central and Eastern Europe
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