Authors: Razzaque H Bhatti
This paper examines the uncovered interest parity hypothesis for five countries of the Commonwealth of Independent States – Armenia, Azerbaijan, Kazakhstan, Kyrgyzstan and Moldova – using quarterly data on three-month treasury-bills rates over the period 1995q1-2010q2. Results based on an unconventional model specification and cointegration and coefficient restrictions tests are strongly supportive of UIP in all cases, except for Armenia. These results suggest that capital and foreign exchange markets of the CIS countries are highly integrated with those of the US markets.
Keywords: International finance, interest parity, forward rate