Abstract
Covered interest parity (CIP) is tested in conventional and Fisherian frameworks using three-month treasury bill rates denominated in eight currencies against the dollar. Results of cointegration and coefficient restriction tests are slightly more favourable for conventional CIP, while model selection tests are more strongly in favour of this version of the theory. One of the conclusions derived from the empirical evidence is that arbitrage, rather than the intergration of financial and commodity markets, is the force maintaining this international parity condition.