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Uncovering the Interest Parity: Does the UIP hold between STIBOR and other Interbank Offered Rates?
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2014 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

In this paper we examine whether the UIP holds between STIBOR and six other Interbank Offered Rates (IBORs). We use OLS regressions to see if the change in spot exchange rate can be explained by 1-month, 3-months and 6- months IBOR differential. The estimates show an inverse relationship than that predicted by the UIP theory. We find stronger statistically significant estimates when testing STIBOR against IBORs in large economies than when tested against IBORs in small economies. We also find that when testing STIBOR against IBORs in small economies the estimates tend to be more in line with the theory than when tested against IBORs in large economies.

Place, publisher, year, edition, pages
2014.
Keyword [en]
UIP, STIBOR, IBOR, OLS, Newey-West, Risk premium
National Category
Economics
Identifiers
URN: urn:nbn:se:uu:diva-226684OAI: oai:DiVA.org:uu-226684DiVA: diva2:726874
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Available from: 2014-06-19 Created: 2014-06-19 Last updated: 2014-06-19Bibliographically approved

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