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A small open economy’s view on interest rate differential’s relation to the nominal exchange rate
Linnaeus University, School of Business and Economics, Department of Economics and Statistics.
2017 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

The characteristics of interest rate differentials’ relationships with the change in nominal exchange rates are here investigated from the small open economy Sweden’s pointof view. We assume rational expectations and risk neutrality. However, these are solelysufficient but not necessary conditions. The only necessary condition is that the deviationsfrom rational expectations and risk neutrality are uncorrelated with the interestrate differential (Chinn and Meredith 2004, p. 412). We find no evidence for the interestrate differentials to be unbiased predictors of the percentage change in nominalexchange rates. With 3- and 6-month maturity interest rates, the signs are positivealthough not statistically different from zero.

Place, publisher, year, edition, pages
2017. , p. 30
Keywords [en]
Small open economy, uncovered interest rate parity, interest rate differential, nominal exchange rate, short-horizon interest rate, long-horizon interest rate
National Category
Economics
Identifiers
URN: urn:nbn:se:lnu:diva-65487OAI: oai:DiVA.org:lnu-65487DiVA, id: diva2:1111066
Subject / course
Economics
Educational program
Business Administration and Economics Programme, 240 credits
Supervisors
Examiners
Available from: 2017-06-19 Created: 2017-06-17 Last updated: 2017-06-19Bibliographically approved

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fulltext(972 kB)101 downloads
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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf