Is covered interest parity arbitrage extinct? Evidence from the spot USD/Yen

J. A. Batten; P. G. Szillagyi

doi:10.1080/13504850701720189

Is covered interest parity arbitrage extinct? Evidence from the spot USD/Yen

J. A. Batten, P. G. Szillagyi

Macquarie Graduate School of Management

Research output: Contribution to journal › Article › peer-review

2 Citations (Scopus)

Abstract

We investigate the long-term covered interest parity (CIP) relationship between the US dollar and the Japanese yen. We find that the CIP relation tends to be one way and favours those with the ability to borrow US dollars. Regression analysis reveals that negative changes in spot exchange rates, positive changes in US interest rates and negative changes in yen interest rates generally affect the deviation from parity. Evidence of declining deviations from equilibrium over the sample period is consistent with a more efficient trading environment.

Original language	English
Pages (from-to)	283-287
Number of pages	5
Journal	Applied Economics Letters
Volume	17
Issue number	3
DOIs	https://doi.org/10.1080/13504850701720189
Publication status	Published - Feb 2010

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Is covered interest parity arbitrage extinct? Evidence from the spot USD/Yen

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