O'Reilly logo

Handbook of Safeguarding Global Financial Stability by Gerard Caprio

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

Chapter 23

Explaining Deviations from Uncovered Interest Rate Parity

P. Bacchetta

University of Lausanne, Lausanne, Switzerland

Centre for Economic Policy Research (CEPR), London, UK

Introduction

A key relationship in international finance is uncovered interest rate parity (UIP). An approximated version of this relationship is

image (23.1)

where st is the log nominal exchange rate (domestic per foreign currency), ii and it* are domestic and foreign one-period nominal interest rates, and Et is market expectation based ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required