RDP 9103: The Failure of Uncovered Interest Parity: Is it Near-Rationality in the Foreign Exchange Market? Data Appendix

The empirical results in the paper are derived from 302 end-week observationsof interest rates and exchange rates from 23 December 1983 to 29 September 1989 inclusive. We use Friday data unless Friday was a holiday, in which case we use the previous trading day's rate.

Exchange Rates

All exchange rates (4 p.m., Sydney) are the foreign currency value of $1US from the International Department of the Reserve Bank of Australia.

Short-Term Interest Rates

3-month interest rates in the Euro-market are chosen as the yield on our hypothetical weekly securities. With the exception of the $A Euro-rate, this data was also provided by the International Department of the Reserve Bank of Australia. The $US, ¥, Swfr and DM rates are London rates. The former two refer to the close while the latter two refer to the afternoon. The £ rate is a Paris reading (time unspecified). From 2 January 1987, the $A rate is the average of the bid and offer rates made available by Deutsche Bank, Sydney (location and time unknown). Before that, the $A rate is the 13-week Australian Treasury Note (mid-day) plus the difference between the $US 3-month Euro-rate and the $US 3-month Treasury Bill (New York close).

Long-Term Interest Rates

Before July 1987, the long-term interest rate data for Japan, West Germany, the United Kingdom and Switzerland are taken from the International Monetary Fund's ‘International Financial Statistics’ (IFS). The IFS data is monthly, so weekly rates are simply the monthly rate repeated four or five times. Since long bond rates change only gradually, the use of monthly data probably introduces minimal error. Over this period, the definition of the long-rates differs considerably across countries. In West Germany, the rate is the monthly average of all yields on bonds of 3 or more years duration. For Japan, it is the end-month observation on the 7-year bond rate. The UK rate is the Wednesday average over the month of 20-year bond yields, while the Swiss rate is based on yields of 10 or more year bonds.

After June 1987 (and before that in the case of Australia and the US), weekly data on 10-year bond rates are available for all countries except Switzerland. All the series are end-week observations at the close of business in the relevant financial centres: New York, Tokyo, Frankfurt, London, Zurich and Sydney. The IFS monthly data is used over the whole period for Switzerland.