A Rank Approach for Studying Cross Currency Bases and the Covered Interest Rate Parity


  • Borradores de economía


  • We use the recently developed panel rank-cointegration test proposed by Pedroni et al. [2015] to check for the stability conditions of the cross-country money market interest rate bases. Using weekly information on short-term interest rates and spot and forward exchange rates for a set of 20 European economies during 2005-2017, we show that in most cases these bases are non-stationary, implying the failure of the Covered Interest Rate Parity condition. Concretely, a mean-reverting behavior is encountered in only two cases. The first includes Greece, Italy and Portugal, while the second Belgium, France and Germany.

fecha de publicación

  • 2017-05

Líneas de investigación

  • Cointegration
  • Covered Interest Rate Parity
  • Nonparametric Rank Tests
  • Time Series


  • 994