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A Rank Approach for Studying Cross-currency Bases and the Covered Interest Rate Parity Artículo uri icon

Abstracto

  • We use a panel rank cointegration approach to check for the stability conditions of the cross-country money market interest rate basis. Using weekly information on short-term interest rates and spot and forward exchange rates for a set of 20 European economies between 2005 and 2017, we show that in most cases these bases are non-stationary, implying the failure of the covered interest rate parity condition. Concretely, a mean-reverting behavior is encountered in only two cases. The first includes Greece, Italy and Portugal, while the second Belgium, France and Germany. © 2019, Springer-Verlag GmbH Germany, part of Springer Nature.

fecha de publicación

  • 2019