Covered Interest Arbitrage: Then vs. Now / Ted Juhl, William Miles, Marc D. Weidenmier.

Format:

Book

Author/Creator:

Juhl, Ted.

Contributor:

National Bureau of Economic Research.

Miles, William.

Weidenmier, Marc D.

Series:

Working Paper Series (National Bureau of Economic Research) no. w10961.

NBER working paper series no. w10961

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Covered Interest Arbitrage

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2004.

Summary:

We introduce a new weekly database of spot and forward US-UK exchange rates as well as interest rates to examine the integration of forward exchange markets during the classical gold standard period (1880-1914). Using threshold autoregressions (TAR), we estimate the transactions cost band of covered interest differentials (CIDs) and compare our results to studies of more recent periods. Our findings indicate that CIDs for the US-UK rate were generally larger during the classical gold standard than any period since. We argue that slower information and communications technology during the gold standard period led to fewer short-term financial flows, higher transactions costs, and larger CIDs.

Notes:

Print version record

December 2004.