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The long memory story of ex post real interest rates. Can it be supported?

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Author Info
Ioannis A. Venetis (Centre of Planning & Economic Research KEPE , Hippokratous 22, 106 80 Athens, Greece)
Agustin Duarte (Departamento Economia Aplicada y Politica Economica, University of Alicante, 03080 Alicante)
Ivan Paya (Departamento Fundamento Analisis Economico, University of Alicante, 03080 Alicante)

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Abstract

This 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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Paper provided by EconWPA in its series Econometrics with number 0404004.

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Length: 18 pages
Date of creation: 28 Apr 2004
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Handle: RePEc:wpa:wuwpem:0404004

Note: Type of Document - pdf; pages: 18. Preliminary version. Please do not quote without authors permission. All comments welcome
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Related research
Keywords: Real interest rate; Long memory; Fractional Integration;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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References listed on IDEAS
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.:
  1. 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. [Downloadable!]
  2. Fraser, Patricia & Taylor, Mark P, 1990. "Some Efficient Tests of International Real Interest Rate Parity," Applied Economics, Taylor and Francis Journals, vol. 22(8), pages 1083-92, August.
  3. Robinson, Peter M. & Yajima, Yoshihiro, 2002. "Determination of cointegrating rank in fractional systems," Journal of Econometrics, Elsevier, vol. 106(2), pages 217-241, February. [Downloadable!] (restricted)
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  4. 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. [Downloadable!] (restricted)
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