{
  "title": "IMF Staff Papers: Volume 49: Special Issue: IMF Annual Research Conference",
  "publication": "IMF Staff Papers, November 4, 2002",
  "sourceUrl": "https://www.imf.org/en/publications/imf-staff-papers/issues/2016/12/30/imf-staff-papers-volume-49-special-issue-imf-annual-research-conference-15743",
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  "summary": "This paper reports for uncovered interest parity (UIP) using daily data for 23 developing and developed countries during the crisis-strewn 1990s. UIP is a classic topic of international finance, a critical building block of most theoretical models, and a dismal empirical failure.",
  "sections": [
    {
      "heading": "Summary and main empirical findings",
      "content": "- Reports tests of uncovered interest parity (UIP) using daily data for 23 developing and developed countries during the crisis-strewn 1990s.\n- UIP definition used: the interest differential is, on average, equal to the ex post exchange rate change.\n- Empirical characterization:\n  - UIP is described as a \"classic topic of international finance\" and \"a critical building block of most theoretical models.\"\n  - UIP is also described as \"a dismal empirical failure.\"\n- Heterogeneity in results:\n  - There is a considerable amount of heterogeneity in the results, which differ wildly by country.\n  - UIP may work differently for countries in crisis, whose exchange and interest rates both display considerably more volatility.\n- Statistical power and volatility:\n  - Higher volatility in crisis countries may provide a more statistically powerful test for the UIP hypothesis.\n- Policy relevance:\n  - Policy-exploitable deviations from UIP are a necessary condition for an interest rate defense."
    },
    {
      "heading": "Data and scope",
      "content": "- Frequency and sample:\n  - Daily data.\n  - 23 developing and developed countries.\n  - Sample period: the 1990s (described as crisis-strewn).\n- Topics and subjects covered:\n  - Subject headings listed: Credit, Depreciation, Exchange rates, Foreign exchange, Money, National accounts, Personal income, Real exchange rates.\n  - Keywords include: Africa, Central and Eastern Europe, company, Credit, Depreciation, donor community, Europe, Exchange rates, firm performance, Global, lending boom, market reform, Personal income, Real exchange rates, recipient government, SP."
    },
    {
      "heading": "Policy implications and interpretation",
      "content": "- Volatility implications:\n  - Greater exchange rate and interest rate volatility during crises increases stakes for financial markets and central banks.\n  - Such volatility may improve the statistical detectability of UIP deviations.\n- Policy-exploitable deviations:\n  - For an interest rate defense to be feasible, deviations from UIP that can be exploited by policy makers must exist.\n- Cross-country heterogeneity:\n  - Because results differ widely by country, policy conclusions cannot be universally applied and require country-specific analysis.\n\n---\n\n\nSource: https://www.imf.org/en/publications/imf-staff-papers/issues/2016/12/30/imf-staff-papers-volume-49-special-issue-imf-annual-research-conference-15743"
    }
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    "Published: November 4, 2002",
    "Series: IMF Staff Papers",
    "Volume: 49",
    "DOI: https://doi.org/10.5089/9781589061231.024",
    "Reports tests of uncovered interest parity (UIP) using daily data for 23 developing and developed countries during the crisis-strewn 1990s.",
    "UIP definition used: the interest differential is, on average, equal to the ex post exchange rate change.",
    "Empirical characterization:",
    "Heterogeneity in results:",
    "Statistical power and volatility:",
    "Policy relevance:",
    "Frequency and sample:",
    "Topics and subjects covered:",
    "Volatility implications:",
    "Policy-exploitable deviations:",
    "Cross-country heterogeneity:"
  ],
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