Please use this identifier to cite or link to this item: http://dspace.iitrpr.ac.in:8080/xmlui/handle/123456789/2056
Title: The nexus between the exchange rates and interest rates: evidence from BRIICS economies during the COVID-19 pandemic
Authors: Garg, B.
Prabheesh, K. P.
Keywords: Uncovered interest rate parity
Granger causality test
Exchange rates
Pandemic
COVID-19
Issue Date: 8-Jul-2021
Abstract: Purpose – This paper aims to investigate whether the interest rate differentials Granger cause expected change in the exchange rate during the COVID-19 period. The study examines if the investors in the international assets and exchange rate markets take advantages of the relevant information obtained during the COVID-19 pandemic. Design/methodology/approach – This paper used daily data ranging from January 31, 2020 to June 30, 2020 and considered BRIICS economies. The study implemented the Toda–Yamamoto’s Granger causality approach to identify the causality between interest rate differentials and exchange rates. For robustness checks, the study used ARLD short-run dynamics to infer causal relations. Findings – Overall, the results indicate that the interest rate differentials improve the predictability of subsequent exchange rate changes in all six BRIICS economies during the COVID-19 period wherein investors are forward-looking. The empirical results pass the robustness checks. Originality/value – There is a lack of studies exploring the relationship between interest rate differentials and exchange rates in the presence of an unanticipated event such as the current pandemic. To the best of the authors’ knowledge, this is the first study to explore the causal linkages between interest rate differentials and expected change in exchange rates, focusing on the COVID-19 outbreak period
URI: http://localhost:8080/xmlui/handle/123456789/2056
Appears in Collections:Year-2020

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