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Mean Reversion in Interest Rates: New Evidence from a Panel of OECD Countries

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  • Wu, Yangru
  • Zhang, Hua

Abstract

Previous studies show that the standard univariate unit root tests cannot reject the hypothesis that interest rates follow integrated processes. In this paper, the authors pool interest rate data of twelve OECD countries and implement a multivariate test. It is found that the unit root hypothesis can be decisively rejected. Copyright 1996 by Ohio State University Press.

Suggested Citation

  • Wu, Yangru & Zhang, Hua, 1996. "Mean Reversion in Interest Rates: New Evidence from a Panel of OECD Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 604-621, November.
    • Handle: RePEc:mcb:jmoncb:v:28:y:1996:i:4:p:604-21
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    References listed on IDEAS

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    1. 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.
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    8. Kandel, Shmuel & Ofer, Aharon R & Sarig, Oded, 1996. "Real Interest Rates and Inflation: An Ex-Ante Empirical Analysis," Journal of Finance, American Finance Association, vol. 51(1), pages 205-225, March.
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    10. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
    11. Evans, Martin D. D. & Lewis, Karen K., 1994. "Do stationary risk premia explain it all?: Evidence from the term structure," Journal of Monetary Economics, Elsevier, vol. 33(2), pages 285-318, April.
    12. Mishkin, Frederic S., 1992. "Is the Fisher effect for real? : A reexamination of the relationship between inflation and interest rates," Journal of Monetary Economics, Elsevier, vol. 30(2), pages 195-215, November.
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