Abstract:This paper provides direct empirical assessment of Uncovered Interest Rate Parity (UIP) for Pakistan. To Test UIP, wide range of maturities have been used and for estimation purpose, we used Johansen cointegration and Dynamic Ordinary Least Square (DOLS). We find that UIP does not hold for short to medium term maturities. However for the long term maturities i.e., 10-year, the result showes that the UIP holds. It means the exchange rate is better predicted by the long term interest rates. These findings sugges… Show more
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