Use of (Time-Domain) Vector Autoregressions to Test Uncovered Interest Parity.
Journal: Review of Economics & Statistics, volume 70, issue 2 May, pages 296-305
In this paper, a vector autoregression model (VAR) is proposed in order to test uncovered interest parity (UIP) in the foreign exchange market. Consider a VAR system of the spot exchange rate (yen/dollar), the domestic (US) interest rate and the foreign (Japanese) inter... View more
6. See Hodrick (1981), Hodrick and Srivastava (1983) for models incorporating risk premium.
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