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Analysis of the development of the exchange rate on the basis of uncovered interest rate parity
Macháček, Marek ; Mandel, Martin (advisor) ; Obešlo, František (referee)
The aim of this diploma thesis is based on the empirical analysis to identify the relationship between the exchange rate and the interest rates in selected countries and verify the validity of the uncovered interest rate parity. In the first part, the author deals with basic theoretical and exchange rate determinants from a fundamental analysis point of view, which attempts to explain the causality between these two variables. The actual analysis was performed at three levels on monthly time series from 2010 to 2016. Graphical analysis was selected as the first stage of the analysis, also including verification of the validity of the Fisher International Effect. Later, regression and vector autoregressive analysis followed. However, the conclusions of the individual empirical parts show that the exchange rate is determined by many factors, not only by the interest rate differential, as assumed the theory of uncovered interest rate parity. These results are also related to the low quality of the estimated models. Uncovered interest rate parity has been confirmed in very few cases, but none of the monitored currency pairs has been validated at all three levels of empirical analysis at the same time. The work offers valuable insight into the trend appreciation or depreciation of the exchange rates at the positive interest rate differential in the selected period.
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