Figures 1 and 2 (below) illustrate the prevailing interest rates in the US, Mexico and Japan from 1990-1995, along with the peso-dollar and yen-dollar exchange rates (measured on the right-hand axis of each graph). For which exchange rate does the theory of Uncovered Interest Parity appear to hold most consistently over this period? For that country, does the theory hold equally well throughout, or is there an episode which seems inconsistent with the theory?

FRED ~ - Interest Rates, Government Securities, Treasury Bills for United States (left) Interest Rates, Government Securities, Treasury Bills for Japan (left) National Currency to US Dollar Exchange Rate: Average of Daily Rates for Japan (right) 160 150 6 140 5 130 Percent per Annum 4 120 National Currency Units per US Dollar 110 2 100 90 0 80 1991 1992 1993 1994 1995 Sources: IMF; OECDFRED ~ - Interest Rates, Government Securities, Treasury Bills for Mexico (left) Interest Rates, Government Securities, Treasury Bills for United States (left) National Currency to US Dollar Exchange Rate: Average of Daily Rates for Mexico (right) 80 8.8 70 8.0 60 7.2 50 6.4 Percent per Annum 40 5.6 National Currency Units per US Dollar 30 4.8 20 4.0 10 3.2 0 2.4 1991 1992 1993 1994 1995 Sources: IMF; OECD