Galí, Jordi, 1961-2021-03-232021Galí J. Uncovered interest parity, forward guidance and the exchange rate. Journal of Money, Credit and Banking. 2021 Feb 5;52(52):465-96. DOI: 10.1111/jmcb.127590022-2879http://hdl.handle.net/10230/46902Under uncovered interest parity (UIP), the size of the effect on the real exchange rate of an anticipated change in real interest rate differentials is invariant to the horizon at which the change is expected. Empirical evidence using U.S., euro area and UK data points to a substantial deviation from that invariance prediction: expectations of interest rate differentials in the near (distant) future are shown to have much larger (smaller) effects on the real exchange rate than is implied by UIP. Some possible explanations are discussed.application/pdfengThis is the peer reviewed version of the following article: Galí J. Uncovered interest parity, forward guidance and the exchange rate. Journal of Money, Credit and Banking. 2021 Feb 5; 52(52): 465-496, which has been published in final form at http://dx.doi.org/10.1111/jmcb.12759. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.info:eu-repo/semantics/articlehttp://dx.doi.org/10.1111/jmcb.12759Forward guidance puzzleUncovered interest rate parityUnconventional monetary policiesOpen economy New Keynesian modelinfo:eu-repo/semantics/openAccess