CIP Deviations, the Dollar, and Frictions in International Capital Markets

141 Pages Posted: 11 May 2021

See all articles by Wenxin Du

Wenxin Du

University of Chicago Booth School of Business

Jesse Schreger

Columbia University - Columbia Business School, Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 4 versions of this paper

Date Written: May 10, 2021

Abstract

The covered interest rate parity (CIP) condition is a fundamental arbitrage relationship in international finance. In this chapter, we review its breakdown during the Global Financial Crisis and its continued failure in the subsequent decade. We review how to measure CIP deviations, discuss the drivers of CIP deviations, and the implications of CIP deviations for global financial markets.

JEL Classification: E0,F0,G0

Suggested Citation

Du, Wenxin and Schreger, Jesse, CIP Deviations, the Dollar, and Frictions in International Capital Markets (May 10, 2021). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2021-57, Available at SSRN: https://ssrn.com/abstract=3843204 or http://dx.doi.org/10.2139/ssrn.3843204

Wenxin Du (Contact Author)

University of Chicago Booth School of Business ( email )

5807 South Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://https://sites.google.com/site/wenxindu/

Jesse Schreger

Columbia University - Columbia Business School, Economics ( email )

420 West 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
51
Abstract Views
329
Rank
336,433
PlumX Metrics