Regime Switches in Exchange Rate Volatility and Uncovered Interest Parity

@article{Ichiue2011RegimeSI,
  title={Regime Switches in Exchange Rate Volatility and Uncovered Interest Parity},
  author={Hibiki Ichiue and K. Koyama},
  journal={Journal of International Money and Finance},
  year={2011},
  volume={30},
  pages={1436-1450}
}
We use a regime-switching model to examine how exchange rate volatility is related to the failure of uncovered interest parity. Main findings are as follows. First, exchange rate returns are strongly influenced by regime switches in the relationship between the returns and interest rate differentials. Second, low-yielding currencies appreciate less frequently, but once it occurs, their movements are faster than when they depreciate. Third, depreciation of low-yielding currencies and low… Expand

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