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Asymmetric dynamics in UK real interest rates

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  • Jerry Coakley
  • Ana-Maria Fuertes

Abstract

This paper explores the long run behaviour and short run dynamics of quarterly UK real interest rates, 1950-1999, in a threshold autoregressive framework. Using bootstrap LR extensions of the Enders and Granger (1998) threshold unit root and asymmetry tests, it finds support for sign and amplitude asymmetric mean reversion. These findings provide one explanation for the apparent persistence in real interest rates and are consistent with asymmetric feedback rules for inflation targeting.

Suggested Citation

  • Jerry Coakley & Ana-Maria Fuertes, 2002. "Asymmetric dynamics in UK real interest rates," Applied Financial Economics, Taylor & Francis Journals, vol. 12(6), pages 379-387.
    • Handle: RePEc:taf:apfiec:v:12:y:2002:i:6:p:379-387
    DOI: 10.1080/09603100010003304
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    References listed on IDEAS

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    1. Zoega, Gylfi & Coakley, Jerry & Fuertes, Ana-Maria, 2000. "Evaluating The Persistence And Structuralist Theories Of Unemployment," CEPR Discussion Papers 2438, C.E.P.R. Discussion Papers.
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    6. Peter C. B. Phillips, 2005. "Econometric Analysis of Fisher's Equation," American Journal of Economics and Sociology, Wiley Blackwell, vol. 64(1), pages 125-168, January.
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    Citations

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    Cited by:

    1. Kanas, Angelos, 2008. "On real interest rate dynamics and regime switching," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2089-2098, October.
    2. Mark J. Holmes & Ping Wang, 2005. "Do African Countries Move Asymmetrically Towards Purchasing Power Parity?," South African Journal of Economics, Economic Society of South Africa, vol. 73(2), pages 292-301, June.
    3. Coakley, Jerry & Fuertes, Ana-Maria, 2006. "Testing for sign and amplitude asymmetries using threshold autoregressions," Journal of Economic Dynamics and Control, Elsevier, vol. 30(4), pages 623-654, April.
    4. Andrew Phiri & Lutho Mbekeni, 2021. "Fisher’s hypothesis, survey-based expectations and asymmetric adjustments: Empirical evidence from South Africa," International Economics and Economic Policy, Springer, vol. 18(4), pages 825-846, October.
    5. Theo Panagiotidis & Mark J Holmes, 2005. "Sustainability and Asymmetric Adjustment: Some New Evidence Concerning Behaviour of the US Current Account," Money Macro and Finance (MMF) Research Group Conference 2005 29, Money Macro and Finance Research Group.
    6. Ana-Maria Fuertes & Jerry Coakley & Andrew Wood, 2004. "A new interpretation of the real exchange rate - yield differential nexus," Money Macro and Finance (MMF) Research Group Conference 2003 32, Money Macro and Finance Research Group.
    7. Holmes, Mark J. & Maghrebi, Nabil, 2006. "Are international real interest rate linkages characterized by asymmetric adjustments?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(4), pages 384-396, October.
    8. Million, Nicolas, 2004. "Central Bank's interventions and the Fisher hypothesis: a threshold cointegration investigation," Economic Modelling, Elsevier, vol. 21(6), pages 1051-1064, December.
    9. McMillan, David G., 2009. "Forward interest rate premium and asymmetric adjustment: Evidence from 16 countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(2), pages 258-273, April.
    10. Andreas Behr, 2007. "A rolling MTAR model to test for efficient stock pricing and asymmetric adjustment," Applied Financial Economics, Taylor & Francis Journals, vol. 17(18), pages 1479-1487.
    11. Kisswani, Khalid M. & Nusair, Salah A., 2013. "Non-linearities in the dynamics of oil prices," Energy Economics, Elsevier, vol. 36(C), pages 341-353.
    12. Khalid Kisswani & Salah Nusair, 2014. "Nonlinear convergence in Asian interest and inflation rates: evidence from Asian countries," Economic Change and Restructuring, Springer, vol. 47(3), pages 155-186, August.

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