The real uncovered interest parity: The case of Canada and the USA
Review articleOpen access
2011/03/01 Full-length article DOI: 10.1016/j.jpolmod.2010.11.002
Journal: Journal of Policy Modeling
AbstractThe aim of this paper is to re-assess the real uncovered interest parity (RUIP) in the light of including domestic demand shocks as possible determinants of the real exchange rate. We use annual data for two close trading partners, namely Canada and the USA. Using cointegration analysis we find evidence in favour of RUIP. In addition, empirical support is provided to show that discretionary fiscal policy actions have a spillover effect to the real exchange rate via real interest rates.
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