AN EXAMINATION OF UNCOVERED INTEREST-RATE PARITY IN SEGMENTED INTERNATIONAL COMMODITY-MARKETS

We examine the effect of segmented commodity markets on the relation b etween forward and future spot exchange rates in a dynamic economy. We calculate the slope coefficient in our theoretical economy from regre ssing exchange rate changes on forward premia. With reasonable paramet er values, the slope coefficient is less than unity. However, even for extreme parameters the slope is not less than zero, as found in the d ata. A negative slope coefficient in a nominal version of the model re quires the covariance between monetary shocks and relative output shoc ks to be significantly negative, in contrast to the covariance in the data.