Real Interest Differentials and Macro Fundamentals: Empirical Estimates
This paper explores the implications of an open-economy version of the Lucas asset pricing model for the empirical relationship between pairwise real interest rate differentials and macroeconomic fundamentals for the United States, West Germany, and the United Kingdom from 1974 to 1989. Using Hansen's Generalized Method of Moments, the model's overidentifying restrictions cannot be rejected, while exclusion restrictions on the effect of fluctuations in money and output growth rates on real interest differentials are rejected in the majority of cases. These results are encouraging for those who believe that structural models driven by fundamental macroeconomic variables can help explain price determination in international financial markets. Copyright @ 1996 by John Wiley & Sons, Ltd. All rights reserved.
Volume (Year): 1 (1996)
Issue (Month): 2 (April)
|Contact details of provider:|| Web page: http://www.interscience.wiley.com/jpages/1076-9307/|
|Order Information:||Web: http://jws-edcv.wiley.com/jcatalog/JournalsCatalogOrder/JournalOrder?PRINT_ISSN=1076-9307|
When requesting a correction, please mention this item's handle: RePEc:ijf:ijfiec:v:1:y:1996:i:2:p:103-16. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.