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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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    1. Martin D.D. Evans & Karen K. Lewis, 1993. "Do Expected Shifts in Inflation Affect Estimates of the Long-Run Fisher Relation?," Working Papers 93-06, New York University, Leonard N. Stern School of Business, Department of Economics.
    2. Rose, Andrew Kenan, 1988. " Is the Real Interest Rate Stable?," Journal of Finance, American Finance Association, vol. 43(5), pages 1095-1112, December.
    3. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
    4. Tsay, Wen-Jen, 2000. "Long memory story of the real interest rate," Economics Letters, Elsevier, vol. 67(3), pages 325-330, June.
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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.

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