The Long Memory Story Of Real Interest Rates. Can It Be Supported?
AbstractThis papers finds evidence of fractional integration for a number of monthly ex post real interest rate series using the GPH semiparametric estimator on data from fourteen European countries and the US. However, we pose empirical questions on certain time series requirements that emerge from fractional integration and we find that they do not hold pointing to ¿spurious¿ long memory and casting doubts with respect to the theoretical origins of long memory in our sample. Common stochastic trends expressed as the sum of stationary past errors do not seem appropriate as an explanation of real interest rate covariation. From an economic perspective, our results suggest that most European countries show higher speed of real interest rate equalization with Germany rather than the US.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2005-01.
Length: 20 pages
Date of creation: Jan 2005
Date of revision:
Publication status: Published by Ivie
Real interest rate; long memory; fractional integration;
Other versions of this item:
- I A Venetis & A Duarte & Ivan Paya, 2006. "The long memory story of real interest rates. Can it be supported?," Working Papers 578952, Lancaster University Management School, Economics Department.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-05 (All new papers)
- NEP-ETS-2006-02-05 (Econometric Time Series)
- NEP-MAC-2006-02-05 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Tsay, Wen-Jen, 2000. "Long memory story of the real interest rate," Economics Letters, Elsevier, vol. 67(3), pages 325-330, June.
- Duarte, Agustin & Holden, Ken, 2003. "The business cycle in the G-7 economies," International Journal of Forecasting, Elsevier, vol. 19(4), pages 685-700.
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