anduncoveredinterestrateparity國際金融香港2-在線瀏覽
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【正文】 red Interest Parity ? fixed exchange rate regime ?Note that only interest rate will adjust to restore the equality ?Can the CBs fix the interest rates at some desired level? ?No. Not without restrictions on capital flow. ?Under pure fixed exchange rate regime a CB does not have moary policy. 37 Uncovered Interest Parity ? floating exchange rate regime ?Recall that in Rt = [Et (et+1 ) et ] / et + Rt* investors faces exchange rate risk when invested in foreign deposits. ?Investors are generally not riskneutral. ?In general, Rt ? [Et (et+1 ) et ] / et + Rt* Rt = [Et (et+1 ) et ] / et + Rt* + risk premium ?investors spend huge amount of money trying to forecast et+1 38 Forecasting et+1 ?Uncovered interest parity: Rt = [Et (et+1 ) et ] / et + Rt* implies ?a forecast of et+1 is ?Et (et+1 ) =et [(Rt Rt* )+1] ?Na239。ve forecast (random walk): et+1 = et + ut+1 ?Et (et+1 ) =et 39 Forecasting et+1 ?Use linear time series models such as ARIMA ECO3131: Applied Forecasting Methods ?Use nonlinear time series models Howell Tong: Nonlinear Time Series ? a Dynamical System Approach ?Journal of Forecasting 40 Uncovered Interest Parity ? fixed exchange rate regime ?In general, Rt ? Rt* ?Why? ?Because [Et (et+1 ) et ] ? 0 ?Because investors may expect the (fixed) exchange rate to change ?and hence risk premium ? 0 41 Covered Interest Parity ?Is there a way to avoid the exchange risk? ?Yes! ?By using a forward contract to offset your position on foreign exchange. ?Hence, may replace Et (et+1 ) with the time t oneperiod ahead forward rate ft,1 Rt = [ft,1 et ] / et + Rt* 42 Forecasting et+1 ?Forward rate suggest: ft = Et (et+1 ) implies ?a forecast of et+1 is ?Et (et+1 ) = ft 43 Empirical evidence of the interest parity ?Covered interest parity: generally supported by data ?Uncovered interest parity: generally not supported by data 44 Empirical evidence of the interest parity ?Figures from Moosa and Bhatti (1997): ?Uncovered interest parity: ?Domestic returns and foreign returns ?Figure (a), Figure (b) Figure (a), Figure (b), Figure (a), Figure (b), Figure (a), Figure (b) ?Covered interest parity: ?Actual forward rate and CIP forward rate. ?Figure (a), Figure (b) Figure (a), Figure (b), Figure (a), Figure (b), Figure (a), Figure (b) 45 Uncovered interest parity is ?rate of return on home deposit = rate of return on foreign deposit ?Rt = [Et (et+1 ) / et ] (1 + Rt* ) 1
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