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Mean-reversion in international real interest rates

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  • Kim, Jae H.
  • Ji, Philip Inyeob

Abstract

This paper examines the mean-reversion property of real interest rates. Many past studies have reported puzzling outcomes of the mean-aversion of real interest rates for a number of countries. In the article, we employ panel unit root tests and carry out half-life estimation based on the bias-corrected bootstrap. These findings of the paper provide strong evidence that, in both major Western and East Asian capital markets (including several emerging ones), real interest rates are mean-reverting. In addition, we find evidence that the degree of mean-reversion of the real interest rates is positively correlated with that of output growth, which is consistent with the implications of standard intertemporal behavior.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 28 (2011)
Issue (Month): 4 (July)
Pages: 1959-1966

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Handle: RePEc:eee:ecmode:v:28:y:2011:i:4:p:1959-1966

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Bootstrap Cross-sectional dependence Half-life Highest density region Panel unit root tests;

References

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