Fin de Siecle Real Interest Parity
AbstractWe evaluate the recent evidence for real interest parity, focusing on long-term yields. Examining the data on financial instruments of various maturities across the G7 countries, we find substantial differences in the degree of real interest equalization measured at different horizons. In general, real interest parity holds better at long horizons than at short. This empirical result is robust to alternative ways of modeling expected inflation rates. Considering the relevance of long-term yields for the investment decisions of firms, our findings imply that the degree of capital mobility among the G-7 economies may be greater than previously thought.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 7880.
Date of creation: Sep 2000
Date of revision:
Publication status: published as Fujii, Eiji and Menzie Chinn. "Fin De Siecle Real Interest Parity," Journal of International Financial Markets, Institutions and Money, 2001, v11(3-4,Sep), 289-308.
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Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F31 - International Economics - - International Finance - - - Foreign Exchange
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