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

Jesse Schreger and Wenxin Du

No 16124, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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-codes: F3 (search for similar items in EconPapers)
Date: 2021-05
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