Testing uncovered interest parity under the assumption of liquidity premia

dc.contributor.author	Niestroj, Benjamin
dc.date.accessioned	2014-05-12T13:04:21Z
dc.date.available	2014-05-12T13:04:21Z
dc.date.issued	2014-05-12
dc.description.abstract	The present study investigates whether liquidity premia can explain deviations from uncovered interest parity. For that purpose I modify a representative agent asset-pricing model by assuming that investors value liquidity services which are unique features of U.S. Treasuries. Further the assumption that domestic and foreign bonds are perfect substitutes is relaxed. Estimation results for U.S. and U.K. data provide support for the hypothesis that investors valuation for U.S. Treasuries liquidity contributes to explain deviations from uncovered interest parity. In contrast to most forward premium regression estimations, I find a positive association between the expected depreciation rate of the U.S. currency relative to the UK currency and the U.S.-U.K. Treasury yield spread.	en
dc.identifier.uri	http://hdl.handle.net/2003/33113
dc.identifier.uri	http://dx.doi.org/10.17877/DE290R-15552
dc.language.iso	en	de
dc.relation.ispartofseries	Discussion Paper / SFB 823;16/2014	en
dc.subject	uncovered interest parity	en
dc.subject	asset pricing	en
dc.subject	liquidity premium	en
dc.subject	key currency	en
dc.subject	exchange rates	en
dc.subject.ddc	310
dc.subject.ddc	330
dc.subject.ddc	620
dc.title	Testing uncovered interest parity under the assumption of liquidity premia	en
dc.type	Text	de
dc.type.publicationtype	workingPaper	de
dcterms.accessRights	open access

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