The Simultaneity Bias of the Uncovered Interest Rate Parity: evidence using survey data for Brazil

Alex Ferreira

Economics Bulletin, 2015, vol. 35, issue 3, 1718-1725

Abstract: The paper focuses on testing the ex ante uncovered interest rate parity (UIP) in a single equation framework. I use survey based expectations as a proxy for observed exchange rate expectations and IV estimation for statistical inference, overcoming the negative bias indicated by the small scale general equilibrium model with standard ingredients. Results from 2001M11 until 2014M12 using data for Brazil and the United States of America (Real/Dollar exchange rate) show strong support for ex ante UIP.

Keywords: Uncovered Interest Rate Parity; Bias; exchange rates (search for similar items in EconPapers)
JEL-codes: E4 F3 (search for similar items in EconPapers)
Date: 2015-08-12
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-15-00078

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