Testing uncovered interest rate parity using LIBOR

摘要: We test uncovered interest rate parity (UIP) using London InterBank Offered Rate (LIBOR) rates for a wide range of maturities. In contrast to other markets, LIBOR markets have minimal frictions. Whereas most previous studies reject UIP, we find that UIP holds several short-term maturities block bootstrap panel unit root tests suggested by Palm et al. (2011) and cointegration techniques Westerlund (2007). Furthermore, the estimation results suggest speed adjustment long-run equilibrium marginally differs across maturity underlying instrument, thus supporting efficient market hypothesis.