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

Publicado en

• Empirical Economics

Resumen

• We use a panel rank cointegration approach to check for the stability conditions of the cross-country money market interest rate basis. Using weekly information on short-term interest rates and spot and forward exchange rates for a set of 20 European economies between 2005 and 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. © 2019, Springer-Verlag GmbH Germany, part of Springer Nature.

autores

• Gómez-González, José Eduardo
• Gómez-Malagon, Santiago
• Melo-Velandia, Luis Fernando
• Ordoñez-Callamand, Daniel

fecha de publicación

• 2019

Área temática

• C12 - Contraste de hipótesis: generalidades
• C33 - Modelos de ecuaciones múltiples/simultáneas; Variables múltiples: Modelos con datos de panel; Modelos espacio-temporales
• E43 - Tipos de interés: determinación, estructura temporal y efectos

Enfoque geográfico

• Belgium  Country
• Europe  Continent
• France  Country
• Germany  Country
• Greece  Country
• Italy  Country
• Portugal  Country

Líneas de investigación

• Cointegration
• Covered Interest Rate Parity
• Cross-Currency Basis
• Nonparametric Rank Tests
• Time Series Panel

Identificador de objeto digital (DOI)

• https://doi.org/10.1007/s00181-019-01633-4