Abstract

http://ssrn.com/abstract=325821
 
 

References (45)



 
 

Citations (9)



 


 



Emerging Market Liberalization and the Impact on Uncovered Interest Rate Parity


Bill B. Francis


University of South Florida - College of Business Administration

Delroy M. Hunter


University of South Florida; University of South Florida

Iftekhar Hasan


Fordham University; Bank of Finland

August 2002

FRB of Atlanta Working Paper No. 2002-16

Abstract:     
In this paper we make use of the uncovered interest rate parity (UIRP) relationship to examine the extent that the liberalization of emerging financial markets has resulted in the integration of developing countries' currency markets into the international capital market. Previous tests of the impact of liberalization on the integration of emerging markets capital markets into world financial markets are confined to equity markets, ignoring currency markets that arguably are more important in determining the success of financial liberalization. We find that, in general, deviation from UIRP in the emerging markets is systematic in nature and that a significant part of emerging market currency excess returns is attributable to time-varying risk premium. Importantly we also find that these countries' currency deposits provide U.S. (equity) investors the benefits of international diversification. Our results also show that for some markets, liberalization improved (worsened) investors' perception of growth opportunity while reducing (increasing) investors' perception of the probability of financial distress. Finally, while several countries benefited from liberalization and have become more integrated into the world capital market, the experience is country specific.

Number of Pages in PDF File: 56

Keywords: capital market integration, uncovered interest rate parity (UIRP), financial liberalization, GARCH model

JEL Classification: F21, F31, F36

working papers series





Download This Paper

Date posted: December 5, 2002  

Suggested Citation

Francis, Bill B. and Hunter, Delroy M. and Hasan, Iftekhar, Emerging Market Liberalization and the Impact on Uncovered Interest Rate Parity (August 2002). FRB of Atlanta Working Paper No. 2002-16. Available at SSRN: http://ssrn.com/abstract=325821 or http://dx.doi.org/10.2139/ssrn.325821

Contact Information

Bill B. Francis
University of South Florida - College of Business Administration ( email )
4202 E. Fowler Avenue, BSN 3403
Dept. of Finance
Tampa, FL 33620-5500
United States
813-974-6300 (Phone)
813-974-3030 (Fax)
HOME PAGE: http://www.coba.usf.edu/departments/finance/facult
Delroy M. Hunter
University of South Florida ( email )
4202 E. Fowler Avenue, BSN 3403
Tampa, FL 33620-5500
United States
813-974-6319 (Phone)
University of South Florida ( email )
4202 E. Fowler Ave, BSN3403
Tampa, FL 33620
United States
8139746319 (Phone)
8139743084 (Fax)
Iftekhar Hasan (Contact Author)
Fordham University ( email )
113 West 60th Street
New York, NY 10023
United States
Bank of Finland ( email )
P.O. Box 160
Helsinki 00101
Finland
Feedback to SSRN


Paper statistics
Abstract Views: 1,705
Downloads: 294
Download Rank: 59,326
References:  45
Citations:  9

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo1 in 0.391 seconds