Is the real interest rate unstable? Some new evidence
AbstractPrior studies typically report that real Treasury bill returns have a unit root. The unit-root findings are not consistent with the long-run Fisher effect and consumptionbased asset pricing models. This study examines a data set of ex ante real returns on US Treasury bills and commercial papers. The statistical analysis employs a new modified Dickey-Fuller test, whc has better power than standard unit-root tests. In contrast to previous findings, strong evidence of stationarity is found for all the real return series under examination. Implications of the results are discussed.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Applied Economics.
Volume (Year): 29 (1997)
Issue (Month): 3 ()
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- Lai, Kon S., 2008. "The puzzling unit root in the real interest rate and its inconsistency with intertemporal consumption behavior," Journal of International Money and Finance, Elsevier, vol. 27(1), pages 140-155, February.
- Lai, Kon S., 2004. "On structural shifts and stationarity of the ex ante real interest rate," International Review of Economics & Finance, Elsevier, vol. 13(2), pages 217-228.
- Smets, Frank & Tsatsaronis, Kostas, 1997.
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