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Is the real interest rate unstable? Some new evidence

  • Kon Lai
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    Prior studies typically report that real Treasury bill returns have a unit root. The unit-root findings are not consistent with the long-run Fisher effect and consumptionbased asset pricing models. This study examines a data set of ex ante real returns on US Treasury bills and commercial papers. The statistical analysis employs a new modified Dickey-Fuller test, whc has better power than standard unit-root tests. In contrast to previous findings, strong evidence of stationarity is found for all the real return series under examination. Implications of the results are discussed.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/000368497327137
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    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 29 (1997)
    Issue (Month): 3 ()
    Pages: 359-364

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    Handle: RePEc:taf:applec:v:29:y:1997:i:3:p:359-364
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