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Long memory properties of real interest rates for 16 countries

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  • Jeremy Couchman
  • Rukmani Gounder
  • Jen-Je Su
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    Abstract

    This study examines the long-run dynamics of ex post and ex ante real interest rates for 16 countries. Three real interest rates -- the realized (ex post) rate and two ex ante rates -- are examined for each of the 16 countries. The magnitude of persistence is estimated using the ARFIMA model. The key empirical results suggest that for the majority of the 16 countries, the long-memory parameters of the three real rates lie between zero and one, and the parameters tend to be considerably smaller for the ex post real rate compared with both of the two ex ante rates.

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    Bibliographic Info

    Article provided by Taylor and Francis Journals in its journal Applied Financial Economics Letters.

    Volume (Year): 2 (2006)
    Issue (Month): 1 (January)
    Pages: 25-30

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    Handle: RePEc:taf:apfelt:v:2:y:2006:i:1:p:25-30

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    References

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    1. Frederic S. Mishkin, 1991. "Is the Fisher Effect for Real? A Reexamination of the Relationship Between Inflation and Interest Rates," NBER Working Papers 3632, National Bureau of Economic Research, Inc.
    2. J. Z. Easaw & S. M. Heravi & J. C. K. Ash & D. J. Smyth, 2002. "Are Hodrick-Prescott `forecasts' rational?," Empirical Economics, Springer, vol. 27(4), pages 631-643.
    3. Tsay, Wen-Jen, 2000. "Long memory story of the real interest rate," Economics Letters, Elsevier, vol. 67(3), pages 325-330, June.
    4. Evans, Martin D D & Lewis, Karen K, 1995. " Do Expected Shifts in Inflation Affect Estimates of the Long-Run Fisher Relation?," Journal of Finance, American Finance Association, vol. 50(1), pages 225-53, March.
    5. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
    6. Rose, Andrew Kenan, 1988. " Is the Real Interest Rate Stable?," Journal of Finance, American Finance Association, vol. 43(5), pages 1095-1112, December.
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    Cited by:
    1. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2012. "Persistence and Cycles in the US Federal Funds Rate," CESifo Working Paper Series 4035, CESifo Group Munich.
    2. Guglielmo Maria Caporale & Luis A. Gil-Alana, 2011. "Persistence and Cyclical Dependence in the Monthly Euribor Rate," CESifo Working Paper Series 3653, CESifo Group Munich.
    3. Cleomar Gomes da Silva & Flávio Vilela Vieira, 2014. "BRICS countries: real interest rates and long memory," Economics Bulletin, AccessEcon, vol. 34(1), pages 409-419.

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