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http://hdl.handle.net/2123/7412
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| Title: | Do Movements in the Forward Discount on the Australian Dollar Predict Movements in Domestic Interest Rates? Evidence from a Time Series Analysis of Covered Interest Parity in Australia in the late 1980s |
| Authors: | Karfakis, C.I. Phipps, A.J. Economics |
| Issue Date: | May-1993 |
| Publisher: | Department of Economics |
| Series/Report no.: | 187 |
| Abstract: | This paper examines covered interest parity using cointegration techniques on a daily data set for Australian dollar/US dollar spot and forward exchange rates and Australian and US interest rates. While the forward premium and the interest rate differential cointegrate in both the 3 month and 6 month markets, the data reject the formal restrictions of covered interest parity. Well defined error-correction mechanisms suggest that the forward premium bears the burden of adjustment to the long run cointegrating relationship and that past changes in the forward premium predict changes in the interest rate differential. |
| URI: | http://hdl.handle.net/2123/7412 |
| ISBN: | 0867587768 |
| Department/Unit/Centre: | Economics |
| Appears in Collections: | Working Papers - Economics |
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