This article analyses the behavior of the Brazilian interest rate, using three measures of rate of return. The series are decomposed into their long run and short run components, as proposed by Vahid and Engle (1993). The results suggest a convergence of the rates to one long run equilibrium. We identify the dominance of the long run component in the composition of the C-Bond rate of return, whilst the short run component dominates in the case of the covered interest premium. There is, however, no clear dominance in the case of the uncovered interest premium.
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Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number
55.
Length: Date of creation: Nov 2002 Date of revision: Publication status: Published in Monetaria, Vol. XXVIII, no. 1 (Enero-Marzo 2005), as Tasas de cupón de cambio en Brasil: componentes de corto y largo plazos Handle: RePEc:bcb:wpaper:55
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