Dollar strength behind breakdown in economic paradigm, says Shin
BIS head of research points to failure of covered interest parity post-2008
The US dollar appears to be behind the failure of a textbook economic relationship post-2008, the Bank for International Settlements' Hyun Song Shin said today (June 8).
Covered interest parity (CIP) dictates that the exchange rate between two currencies adjusts to eliminate any opportunity for arbitrage between the nominal interest rates prevailing in the two countries.
This held with few exceptions before 2008 but has since broken down, Shin told a conference hosted by the World Bank.
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