Testing the interest-parity condition with Irving Fisher's example of Indian rupee and sterling bonds in the London financial market, 1869–1906

Herger, Nils (2019). Testing the interest-parity condition with Irving Fisher's example of Indian rupee and sterling bonds in the London financial market, 1869–1906. Financial history review, 26(1), pp. 21-42. Cambridge University Press 10.1017/S0968565018000100

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Following the pioneering work of Irving Fisher, this article assesses the uncovered interest-parity (UIP) condition by comparing Indian interest and exchange rates during the 1869 to 1906 period. The Indian case provides a good example of the UIP condition, since Indian rupee and sterling bonds were simultaneously traded in the London financial market and subject to negligible default risks. Large deviations from the UIP condition arose when India suffered from pervasive levels of uncertainty about the future of its silver-based currency system. Otherwise, a relatively close correlation arises between sterling-to-rupee interest-rate differences and exchange-rate changes.

Item Type:

Journal Article (Original Article)

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics
03 Faculty of Business, Economics and Social Sciences > Department of Economics > Institute of Economics

UniBE Contributor:

Herger, Nils

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

ISSN:

0968-5650

Publisher:

Cambridge University Press

Language:

English

Submitter:

Dino Collalti

Date Deposited:

13 Aug 2019 10:00

Last Modified:

12 Nov 2019 15:48

Publisher DOI:

10.1017/S0968565018000100

BORIS DOI:

10.7892/boris.129862

URI:

https://boris.unibe.ch/id/eprint/129862

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