Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/318161 
Authors: 
Year of Publication: 
2019
Series/Report no.: 
BCAM Working Paper No. 1908
Publisher: 
Birkbeck, University of London, Birkbeck Centre for Applied Macroeconomics (BCAM), London
Abstract: 
A crucial no-arbitrage condition on foreign exchange markets, covered interest parity (CIP),held almost exactly before the Global Financial Crisis (GFC) and failed since then. CIP deviations have been particularly puzzling in relatively calm markets after 2014. This paper explains deviations from CIP, measured by the cross-currency basis from swaps (CCBS), in terms of significant policy and volatility effects in a preferred habitat model of the Eurodollar swap market. Estimation is done using EGARCH in mean for a set of CCBS maturities. The term structure of the CCBS is further analysied in a Vector Error Correction Model(VECM).
Subjects: 
Macro Finance
International Monetary Economics
Preferred Habitat
Foreign Exchange Markets
International Finance
JEL: 
E43
E44
E5
F31
G12
G15
Document Type: 
Working Paper

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