Uncovered interest parity rates through the general moments theory

Abstract

THE OBJETIVE OF THIS PAPER IS TO ANALYZE THE HYPOTHESIS OF UNCOVERED INTEREST PARITY (UIP) UNDER THE ASSUPMPTION OF RATIONAL EXPECTATIONS (RE) BY MEANS OF THE GENERALIZED METHOD OF MOMENTS (GMM). THE RESULTS INDICATE THAT THE UIP IS REJECTED. HOWEVER, THE ASSOCIATION DEGREE BETWEEN INTEREST RATE AND EXPECTATION OF THE EXCHANGE RATE IS HIGH WITH THE FLOATING EXCHANGE RATE REGIME AND ZERO AVERAGE RESERVE REQUIREMENT.