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Long memory properties of real interest rates for 16 countries

  • Jeremy Couchman
  • Rukmani Gounder
  • Jen-Je Su
Registered author(s):

    This study examines the long-run dynamics of ex post and ex ante real interest rates for 16 countries. Three real interest rates -- the realized (ex post) rate and two ex ante rates -- are examined for each of the 16 countries. The magnitude of persistence is estimated using the ARFIMA model. The key empirical results suggest that for the majority of the 16 countries, the long-memory parameters of the three real rates lie between zero and one, and the parameters tend to be considerably smaller for the ex post real rate compared with both of the two ex ante rates.

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    Article provided by Taylor and Francis Journals in its journal Applied Financial Economics Letters.

    Volume (Year): 2 (2006)
    Issue (Month): 1 (January)
    Pages: 25-30

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    Handle: RePEc:taf:apfelt:v:2:y:2006:i:1:p:25-30
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    1. Rose, Andrew Kenan, 1988. " Is the Real Interest Rate Stable?," Journal of Finance, American Finance Association, vol. 43(5), pages 1095-1112, December.
    2. Evans, Martin D D & Lewis, Karen K, 1995. " Do Expected Shifts in Inflation Affect Estimates of the Long-Run Fisher Relation?," Journal of Finance, American Finance Association, vol. 50(1), pages 225-53, March.
    3. J. Z. Easaw & S. M. Heravi & J. C. K. Ash & D. J. Smyth, 2002. "Are Hodrick-Prescott `forecasts' rational?," Empirical Economics, Springer, vol. 27(4), pages 631-643.
    4. Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
    5. Tsay, Wen-Jen, 2000. "Long memory story of the real interest rate," Economics Letters, Elsevier, vol. 67(3), pages 325-330, June.
    6. 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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