Stefanescu, Razvan and Dumitriu, Ramona and Nistor, Costel (2009): Analysis of the dynamic relation between the currency rates and the interest rates from Romania and euro area before and during the financial crisis. Published in: Proceedings of the Challenges for Analysis of the Economy, the Businesses, and Social Progress International Scientific Conference, Szeged, November 19-21, 2009 (14. July 2010): pp. 563-578.
Download (152Kb) | Preview
This paper examines the changes induced by the actual financial crisis in the dynamic relation between the currency rates and the differentials of the interest rates from Romania and euro area. In the framework of the Uncovered Interest Rate Parity hypothesis we apply the Vector Autoregressive methodology for daily values of the currency rates and the interest rates during the crisis. We compare the results obtained with a similar analysis for a period of time before the crisis began and we find significant differences.
|Item Type:||MPRA Paper|
|Original Title:||Analysis of the dynamic relation between the currency rates and the interest rates from Romania and euro area before and during the financial crisis|
|English Title:||Analysis of the dynamic relation between the currency rates and the interest rates from Romania and euro area before and during the financial crisis|
|Keywords:||Uncovered Interest Rates Parity, Vector Autoregressive Model, Financial Crisis, Romanian Foreign Exchange Market|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
G - Financial Economics > G1 - General Financial Markets > G19 - Other
G - Financial Economics > G0 - General > G01 - Financial Crises
|Depositing User:||Razvan Stefanescu|
|Date Deposited:||05. Oct 2012 16:37|
|Last Modified:||12. Feb 2013 04:48|
Amisano, G. - Giannini, C. 1997: Topics in Structural VAR Econometrics, 2nd edn, Springer, Berlin
Bekaert, G. - Harvey, C. R. 2000: Foreign Speculators in Emerging Equity Markets. Journal of Finance, 55, 565-613.
Bekaert, G. – Wei, M. – Xing, Y. 2002: Uncovered Interest Rate Parity and the Term Structure. NBER Working Paper No. 8795.
D'Amato, M. – Pistoresi, B. 2001: Interest Rate Spreads between Italy and Germany, 1995-1997. Applied Financial Economics 11 (December): 603-12.
Dornbusch, R. 1976: Expectations and Exchange Rate Dynamics. Journal of Political Economy. Vol. 84, No. 6, December, pp. 1161-1176.
Flood, R. P. – Rose, A. K. 2001: Uncovered Interest Parity in Crisis: The Interest Rate Defence in the 1990s. Working Paper No. 01/207, International Monetary Fund, Washington.
Francis, B. – Hasan, I. – Hunter, D. 2002: Emerging Market Liberalization and the Impact on Uncovered Interest Rate Parity. Federal Reserve Bank of Atlanta. Working Paper 2002-16 August
Froot, K. A. – Ito, T. 1989: On the Consistency of Short-Run and Long-Run Exchange Rate Expectations. Journal of International Money and Finance, Vol. 8, No. 4, pp. 487-510.
Froot, K. A. 1990: Short Rates and Expected Asset Returns. Working Paper No. 3247. National Bureau of Economic Research, Cambridge, Massachusetts.
Froot, K. A. – Thaler, R.H. 1990: Foreign Exchange. Journal of Economic Perspectives, Vol. 4, No. 3, Summer, pp. 179-192.
Guy, M. - Chinn M. 1998: Long Horizon Uncovered Interest Parity, Working Paper No. 6797. National Bureau of Economic Research, Cambridge, Massachusetts.
Isard, P. 1995: Exchange Rate Economics. Cambridge University Press, Cambridge.
Lanne, M. - Lütkepohl, H. - Saikkonen, P. 2001: Test procedures for unit roots in time series with level shifts at unknown time. Discussion paper, Humboldt - Universität Berlin.
Loopeseko, B.E. 1984: Relationships Among Exchange Rates, Intervention, and Interest Rates. Journal of International Money and Finance, 3, pp. 257-277.
MacDonald, R. – Taylor, M.P. 1992: Exchange Rate Economics: A Survey. IMF Staff Papers, Vol. 39, No. 1, March, pp. 1-57.
McCallum, B. T. 1994: A Reconsideration of the Uncovered Interest Parity Relationship. Journal of Monetary Economics, Vol. 33, No. 1, February, pp. 105-132.
Saikkonen, P. - Lütkepohl, H. 2000: Trend adjustment prior to testing for the cointegrating rank of a vector autoregressive process. Journal of Time Series Analysis, 21: 435-456.
Saikkonen, P. - Lütkepohl, H. 2002: Testing for a unit root in a time series with a level shift at un-known time. Econometric Theory, 18:313-348.
Takagi, Shinji 1991: Exchange Rate Expectations: A Survey of Survey Studies. IMF Staff Papers. 38(1) March: 156-183.
Wu, J. – L. 1999: A Re-Examination of the Exchange Rate-Interest Differential Relationship: Evidence from Germany and Japan. Journal of Money and Finance, Vol. 18, No. 2, April, p. 319-336.