The long memory story of ex post 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.
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Bibliographic InfoPaper provided by EconWPA in its series Econometrics with number 0404004.
Length: 18 pages
Date of creation: 28 Apr 2004
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Real interest rate; Long memory; Fractional Integration;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- 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-2004-05-02 (All new papers)
- NEP-ETS-2004-05-02 (Econometric Time Series)
- NEP-MON-2004-05-02 (Monetary Economics)
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.:
- Peter M Robinson & Yoshihiro Yajima, 2001.
"Determination of Cointegrating Rank in Fractional Systems,"
STICERD - Econometrics Paper Series
/2001/423, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Robinson, Peter M. & Yajima, Yoshihiro, 2002. "Determination of cointegrating rank in fractional systems," Journal of Econometrics, Elsevier, vol. 106(2), pages 217-241, February.
- Stilianos Fountas & Jyh-lin Wu, 1998.
"Testing for Real Interest Rate Convergence in European Countries,"
24, National University of Ireland Galway, Department of Economics, revised 1998.
- Fountas, Stilianos & Wu, Jyh-lin, 1999. "Testing for Real Interest Rate Convergence in European Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(2), pages 158-74, May.
- Adrian W. Throop, 1994. "International financial market integration and linkages of national interest rates," Economic Review, Federal Reserve Bank of San Francisco, pages 3-18.
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