Paper #1600

Títol:

Uncovered interest parity, forward guidance and the exchange rate

Autor:

Jordi Galí

Data:

Maig 2017

Resum:

Under uncovered interest parity (UIP), the size of the e¤ect on the real exchange rate of an anticipated change in real interest rate di¤erentials is invariant to the horizon at which the change is expected. Empirical evidence using US, euro area and UK data points to a substantial deviation from that invariance prediction: expectations of interest rate di¤erentials in the near (distant) future are shown to have much larger (smaller) e¤ects on the real exchange rate than is implied by UIP. Some possible explanations are discussed.

Paraules clau:

forward guidance puzzle, uncovered interest rate parity, unconventional monetary policies, open economy New Keynesian model.

Codis JEL:

E43, E58, F41,

Àrea de Recerca:

Macroeconomia i Economia Internacional

Publicat a:

Journal of Money, Credit and Banking 52(S2), 465-496.

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