THE APPLICATION OF REGRESSION ANALYSIS IN TESTING UNCOVERED INTEREST RATE PARIT Cover Image

THE APPLICATION OF REGRESSION ANALYSIS IN TESTING UNCOVERED INTEREST RATE PARIT
THE APPLICATION OF REGRESSION ANALYSIS IN TESTING UNCOVERED INTEREST RATE PARIT

Author(s): Joanna Kisielińska, Katarzyna Czech
Subject(s): Economy
Published by: Szkoła Główna Gospodarstwa Wiejskiego w Warszawie
Keywords: uncovered interest rate parity; exchange rate; linear regression model

Summary/Abstract: The aim of the paper is to evaluate and compare two linear regression models proposed by Froot and Frankel (1989) and to show their application in verification of the uncovered interest rate parity (UIP) hypothesis in the selected ten exchange rate markets. The paper shows that both models proposed by Froot and Frankel (1989) are formally equivalent, but they may give different regression results. Many researchers claim that uncovered interest rate parity tends to hold more frequently in emerging markets than in developed economies. The paper is focused on five developed and five emerging economies. It is partly confirmed that developing countries work better in terms of UIP.

  • Issue Year: XIV/2013
  • Issue No: 1
  • Page Range: 232-242
  • Page Count: 11
  • Language: English
Toggle Accessibility Mode