Testing the Foreign Exchange Parity Relations: A Case Analysis of UK Sterling, Japanese Yen and Us Dollar
International Journal of Economics, Finance and Management Sciences
Volume 2, Issue 6, December 2014, Pages: 356-361
Received: Nov. 28, 2014; Accepted: Dec. 9, 2014; Published: Dec. 27, 2014
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Author
Ibrahim Zubairu, Department of Accountancy Studies, School of Business, Accra Polytechnic, Accra, Ghana
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Abstract
Since the financial globalization has expanded and developed increasingly fast in recent years, the international parity relationships have been extensively studied due to their importance in international trade and investment. This paper investigates purchasing power parity (PPP), interest rate parity (IRP) and unbiased expectation hypothesis by analyzing three main currencies; UK sterling, Japanese Yen and US dollar during 2008 to 2010. Further, forward premium or discount is calculated and interpret in the study with time series data and ordinary least square (OLS) regression methodologies. It was found that, the unbiased expectation hypothesis and international interest parity holds for Japan-US case but does not hold for Japan-UK case. Finally, the purchasing Power Parity (PPP) holds for both two cases, which is varies with most previous literature.
Keywords
Testing the Foreign Exchange Parity Relations: A Case Analysis of UK Sterling, Japanese Yen and Us Dollar
To cite this article
Ibrahim Zubairu, Testing the Foreign Exchange Parity Relations: A Case Analysis of UK Sterling, Japanese Yen and Us Dollar, International Journal of Economics, Finance and Management Sciences. Vol. 2, No. 6, 2014, pp. 356-361. doi: 10.11648/j.ijefm.20140206.18
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