An Empirical Investigation into the Causes of Deviations from Covered Interest Parity When the Domestic Currency is Pegged to a Basket

Imad A. Moosa ； Nabeel E. Al-Loughani

《中國財務學刊》 4卷4期 (1997/04) Pp. 29-45

https://doi.org/10.6545/JoFS.1997.4(4).2

並列摘要

This paper examines deviations from the equilibrium condition implied by covered interest parity as applied to the exchange rates between the Kuwaiti dinar (KD) and four major currencies. Formal empirical evidence indicates that speculation plays a major role in determining the forward rate and thus in explaining deviations from CIP. No role is found for transaction costs. Moreover, speculation is found to be the dominant force determining the forward rate between the KD and the dollar, a result that is explained in terms of the relative stability of this exchange rate.

並列關鍵字

Covered Interest Parity ； Arbitrage ； Speculation