政大機構典藏-National Chengchi University Institutional Repository(NCCUR):Item 140.119/36599

政大機構典藏-National Chengchi University Institutional Repository(NCCUR):Item 140.119/36599

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政大典藏 > College of Commerce > Department of International Business > Theses > Item 140.119/36599

Please use this identifier to cite or link to this item: https://nccur.lib.nccu.edu.tw/handle/140.119/36599

Title:	Accounting for Uncovered Interest Rate Parity - The Permanent and Transitory Decomposition Approach
Authors:	張惠玲
Contributors:	郭炳伸林信助張惠玲
Keywords:	UIP decomposition
Date:	2004
Issue Date:	2009-09-18 18:56:35 (UTC+8)
Abstract:	In most of the empirical research about the uncovered interest rate parity (UIP), estimation of the condition at short horizons rejects this theoretical proposition and presents just opposite outcome, while estimation at long horizons reports more consistent results with the proposition. Based on the belief that permanent components may convey more information in the UIP condition, we adopt in this thesis the permanent-transitory decomposition approach introduced by Gonzalo and Granger (1995) to estimate the common long memory components of interest rates and that of exchange rate. We then re-evaluate the UIP condition using the decomposed permanent and transitory parts, respectively. Our results reinforce the stylized facts existing in the literature, while it remains to be answered why empirical evidence does not favor the UIP condition. In most of the empirical research about the uncovered interest rate parity (UIP), estimation of the condition at short horizons rejects this theoretical proposition and presents just opposite outcome, while estimation at long horizons reports more consistent results with the proposition. Based on the belief that permanent components may convey more information in the UIP condition, we adopt in this thesis the permanent-transitory decomposition approach introduced by Gonzalo and Granger (1995) to estimate the common long memory components of interest rates and that of exchange rate. We then re-evaluate the UIP condition using the decomposed permanent and transitory parts, respectively. Our results reinforce the stylized facts existing in the literature, while it remains to be answered why empirical evidence does not favor the UIP condition.
Reference:	[1] Alexius, A. (2001), \\Uncovered Interest Parity Revisited," Review of In- ternational Economics, 9(3), pp.505-517. [2] Bekaert, G., M. Wei and Y. Xing (2002), \\Uncovered Interest Rate Parity and the Term Structure," NBER Working Paper No.8795, February. [3] Beveridge, S. and C. R. Nelson (1981), \\A New Approach to Decomposi- tion of Economic Time Series into Permanent and Transitory Components with Particular Attention to Measurement of the "Business Cycle`," Jour- nal of Monetary Economics, 7, pp.151-174. [4] Chinn, M. D. and G. Meredith (2003), \\Monetary Policy and Long- Horizon Uncovered Interest Parity," forthcoming, IMF Sta® Papers. [5] Chinn, M. D. and G. Meredith (2002), \\Testing Uncovered Interest Parity at Short and Long Horizons during the Post-Bretton Woods Era," UCSC Center for International Economics Working Paper, June. [6] Froot, K. A. and R. H. Thaler (1990), \\Anomalies: Foreign Exchange," Journal of Economic Perspectives, 4(3), Summer, pp.179-192. [7] Gonzalo, J. and C. Granger (1995), \\Estimation of Common Long- Memory Components in Cointegrated Systems," Journal of business & economic statistics, Jan., 13(1), pp.27-35. [8] Johansen, S. (1988), \\Statistical Analysis of Cointegration Vectors," Jour- nal of Economic Dynamics and Control, 12, pp.231-254. [9] Johansen, S. and K. Juselius (1990), \\Maximum Likelihood Estimation and Inference on Cointegration- with Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, 52(2), pp.169-210. [10] MacDonald, R. and M. P. Taylor (1992), \\Exchange Rate Economics: A survey," IMF Sta® Papers, 39(1), pp.1-57. [11] Marey, P. S. (2004), \\Uncovered Interest Parity Tests and Exchange Rate Expectations," Working Papers, ROA, Maastricht University. [12] McCallum, B. T. (1994), \\A Reconsideration of the Uncovered Interest Parity Relationship," Journal of Monetary Economics, 33, pp.105-132. [13] Meredith, G. and Y. Ma (2002), \\The Forward Premium Puzzle Revis- ited," IMF Working Papers 02/28, November. [14] Quah, D. (1992), \\The Relative Importance of Permanent and Transitory Components: Identi‾cation and some Theoretical Bounds," Economet- rica, 60, pp.107-118. [15] Popper, H. (1993), \\Long-Term Covered Interest Parity: Evidence from Currency Swaps," Journal of International Money and Finance, 12, pp.439-448. [16] Stock, J. H. and M. W. Watson (1988), \\Testing for common trends," Journal of the American Statistical Association, 83, pp.1097-1107.
Description:	碩士國立政治大學國際經營與貿易研究所 91351013 93
Source URI:	http://thesis.lib.nccu.edu.tw/record/#G0913510131
Data Type:	thesis
Appears in Collections:	[Department of International Business] Theses

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