Testing Uncovered Interest Rate Parity in Asian Countries

<p>This dissertation carries out empirical testing of Uncovered Interest Rate Parity (UIP) for 9 Asian countries using daily data from the period 2009–2022. The extent to which UIP holds is of interest from a number of perspectives since it is widely used in many international monetary analyses. It is relevant to testing the degree of international capital mobility, the efficiency of the foreign exchange market, and the possibility of earning profits from the carry trade. Earlier research has found mixed results when testing Uncovered Interest Rate Parity (UIP) for emerging markets. This study finds that UIP deviations do not show a consistent pattern with respect to maturity. UIP holds better between Asian countries and the US dollar than with the Japanese yen. A number of explanations of the deviations from UIP have been advanced in the literature, with mixed results. I investigate the effects of capital controls and a number of risk factors. My results suggest that while factors such as capital controls and risks are important, they are not sufficient to explain the deviations from UIP. Limits to arbitrage, a factor that has been neglected in much research, seem to be part of the explanation of UIP deviations for a number of countries. A major innovation of this dissertation is to examine the patterns of forecast errors over time. My analysis of the deviations from UIP over time for nine Asian countries reveals patterns that cannot easily be detected by the linear estimation that has been used in most previous studies and finds that several of the explanations for deviations that have been offered do not fit the data.</p>

Name thesis:degree_name

Economics, PhD

Level thesis:degree_level

Restricted to Claremont Colleges Dissertation

Discipline thesis:degree_discipline

School of Social Science, Politics, and Evaluation

Year dc:date.available

2025

Author dc:creator

• Zhang, Dan

Contributors dc:contributor

• Graham Bird
• Levan Efremidze

• Economics

Repository record dc:identifier

https://scholarship.claremont.edu/cgu_etd/979

OAI identifier oai:identifier

oai:scholarship.claremont.edu:cgu_etd-2001