On the long and short run relationship between the forward rate and the interest parity

Published

Journal Article

The interest parity theory postulates that a one percentage point increase in the interest differential favoring a currency will be accompanied by an increase in the discount on that currency in the forward market of one percentage point as well. Using Canadian data we find that the forward rate responds to the interest differential with a lag. Moreover, a unit increase in the differential favoring the U.S. was accompanied in the long run by a rise in the discount on the forward U. S. dollar which was not significantly different from unity. © 1979.

Full Text

Duke Authors

Cited Authors

  • Pedersson, G; Tower, E

Published Date

  • January 1, 1979

Published In

Volume / Issue

  • 1 / 1

Start / End Page

  • 65 - 77

International Standard Serial Number (ISSN)

  • 0164-0704

Digital Object Identifier (DOI)

  • 10.1016/0164-0704(79)90021-1

Citation Source

  • Scopus