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Is There a Unit Root in East-Asian Short-Term Interest Rates?

Author

Listed:
  • Chew Lian Chua

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Sandy Suardi

    () (School of Economics, The University of Queensland)

Abstract

This paper tests for the presence of nonlinear dynamics in selected Asian short rates and employs a regime varying unit root test to detect non-stationarity for distinct regimes. Nonlinearities in the form of Markov-switching dynamics are found in all short rates sample. The mean-reverting behaviour of interest rates is dependent on both the level and volatility of interest rates. The occasional random walk and mean-reverting dynamics of short rates are attributed to the macroeconomic fundamentals, exchange rate regimes and monetary policy objectives in these economies.

Suggested Citation

  • Chew Lian Chua & Sandy Suardi, 2005. "Is There a Unit Root in East-Asian Short-Term Interest Rates?," Melbourne Institute Working Paper Series wp2005n14, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  • Handle: RePEc:iae:iaewps:wp2005n14
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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2005n14.pdf
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    References listed on IDEAS

    as
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