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Real interest parity in Central and Eastern European countries: Evidence on integration into EU and the US markets

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  • Baharumshah, Ahmad Zubaidi
  • Soon, Siew-Voon
  • Boršič, Darja

Abstract

We investigate the validity of real interest parity (RIP) for the 13 Central and Eastern European countries, over the period 1996–2011. We consider a panel stationarity test that allows for multiple breaks advocated by Carrion-i-Silvestre et al. (2005) and confirmed the strong version of RIP. We found that the events of the last two decades, including the recent global financial crisis affected most of the real interest differential series. Based on the local-persistent model, we found that these countries take less than a year to converge to the RIP value. Financial market integration in these countries is invariant with respect to the reference country—the US and EU.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 25 (2013)
Issue (Month): C ()
Pages: 163-180

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Handle: RePEc:eee:intfin:v:25:y:2013:i:c:p:163-180

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Web page: http://www.elsevier.com/locate/intfin

Related research

Keywords: Real interest rate parity; Structural breaks; Half-lives;

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References

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Cited by:
  1. Claudiu Tiberiu Albulescu & Dominique Pepin & Aviral Kumar Tiwari, 2014. "A RE-EXAMINATION OF REAL INTEREST PARITY IN CEECs USING OLD AND NEW GENERATIONS OF PANEL UNIT ROOT TESTS," Working Papers hal-00959475, HAL.

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