Nonlinear stationarity of real interest rates in the EMU countries
AbstractPurpose – This paper aims to examine two hypotheses that have not been well investigated in the existing literature. One hypothesis is that the real interest rates of industrial countries tend to be mean-reverting during the current floating exchange rate period. Another hypothesis is that the real interest rates of the countries involved in forming the Euro area are more likely to behave as nonlinear stationary series than those of other industrial countries. Design/methodology/approach – The study applies the conventional linear unit root tests and recently developed nonlinear unit root tests, as well as the tests of specifying nonlinearity in time series, to the short-term real interest rates of 16 industrial countries. Findings – The results of the study provide support for both hypotheses. Practical implications – The results imply that, having adopted target-zone type stabilization policies for years, the central banks of European Monetary Union (EMU) countries were likely to have exercised monetary policies in a nonlinear way, especially in the process of meeting the requirements of joining EMU. Originality/value – The study provides stronger evidence than previous studies for the theory that real interest rates of industrial countries tend to have mean-reverting behavior. The study suggests that more active monetary policies for inflation control in the floating exchange rate period may have enhanced mean reversion in real interest rates.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Emerald Group Publishing in its journal Journal of Economic Studies.
Volume (Year): 38 (2011)
Issue (Month): 6 (November)
Contact details of provider:
Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.