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Reconsidering Real Interest Parity for Traded and Nontraded Goods

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  • Jaebeom Kim

Abstract

The goal of this paper is to examine the hypothesis of real interest rate parity by contrasting real interest rates across traded and nontraded goods under flexible exchange rates. We employ panel unit root tests to investigate the stationarity of real interest rate differentials. In particular, empirical results support the mean-reverting property of real interest rate differentials for interest rates measured in terms of traded goods. Copyright © 2006 The Author; Journal compilation © 2006 Blackwell Publishing Ltd.

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  • Jaebeom Kim, 2006. "Reconsidering Real Interest Parity for Traded and Nontraded Goods," Review of International Economics, Wiley Blackwell, vol. 14(2), pages 306-315, May.
  • Handle: RePEc:bla:reviec:v:14:y:2006:i:2:p:306-315
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    1. Martin Feldstein, 1991. "Domestic Saving and International Capital Movements in the Long Run and the Short Run," NBER Chapters,in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 331-353 National Bureau of Economic Research, Inc.
    2. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Chapters,in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220 National Bureau of Economic Research, Inc.
    3. Robert E. Cumby & Maurice Obstfeld, 1984. "International Interest Rate and Price Level Linkages under Flexible Exchange Rates: A Review of Recent Evidence," NBER Chapters,in: Exchange Rate Theory and Practice, pages 121-152 National Bureau of Economic Research, Inc.
    4. Breuer, Janice B. & McNown, Robert & Wallace, Myles, 2000. "The Quest for Purchasing Power Parity with a Series-specific Unit Root Test Using Panel Data," Working Papers 112956, Clemson University, Center for International Trade.
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    1. repec:bla:etrans:v:25:y:2017:i:4:p:663-680 is not listed on IDEAS
    2. Mariam Camarero & Josep Lluis Carrion-I-Silvestre & Cecilio Tamarit, 2009. "Testing For Real Interest Rate Parity Using Panel Stationarity Tests With Dependence: A Note," Manchester School, University of Manchester, vol. 77(1), pages 112-126, January.
    3. Ya-Chi Lin & Kuo-Chun Yeh, 2016. "The Impact of 2007/08 Financial Crisis on the Stability and Enlargement of the EMU," Review of Development Economics, Wiley Blackwell, vol. 20(2), pages 624-634, May.

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