IMF Staff Papers, Volume 51, No. 3
November 23, 2004
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This paper tests uncovered interest parity (UIP) using interest rates on longer maturity bonds for the Group of Seven countries. These long-horizon regressions yield much more support for UIP—all of the coefficients on interest differentials are of the correct sign, and almost all are closer to the UIP value of unity than to zero. The paper also analyzes the decision by a government facing electoral uncertainty to implement structural reforms in the presence of fiscal restraints similar to the Stability and Growth Pact.
Subject: Asset prices, Exchange rates, Foreign exchange, Inflation, Labor, Labor unions, Prices, Real exchange rates
Keywords: Asia and Pacific, Asset prices, Central and Eastern Europe, Europe, Exchange rates, Global, Inflation, inflation expectation, Labor unions, liberalization episode, market efficiency, market performance, market value, monetary policy rule, monopoly trade union, price level, Real exchange rates, SP, Sub-Saharan Africa, trade liberalization
Pages:
216
Volume:
2004
DOI:
Issue:
003
Series:
IMF Staff Papers No. 2004/003
Stock No:
SPIEA2004003
ISBN:
9781589063518
ISSN:
1020-7635
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