A Panel Data Analysis of the Validity of Uncovered Interest Rate Parity (UIRP) in Selected African Countries

Deebii Nwiado, Lezaasi LeneeTorbira


The theory of interest rate parity (covered and uncovered) has been severally examined by scholars from different backgrounds. Results from empirical studies have been mixed. Macroeconomics of Nation States are not monolithic. These variations in macroeconomic behaviour conditions exchange rate movements and thus interest rate changes. Even temporal macroeconomic policies such as the Certificate of Capital Importation (CCI) in Nigeria and similar policy in Malaysia could distorts the application of the theory of interest rate parity across board. Given that such distortions are rift, it is difficult to obtain a perfect result for IRP (Covered or Uncovered). This paper examined uncovered interest rate parity using the methodology of applied financial econometrics of panel data in selected African countries. The result is wholesomely inconclusive. While parity is applicable between Nigeria, Kenya and Egypt, it is not the case with Botswana and Ghana.

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DOI: https://doi.org/10.5430/rwe.v7n2p15

Research in World Economy
ISSN 1923-3981(Print)ISSN 1923-399X(Online)


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