The Long Memory Story Of Real Interest Rates. Can It Be Supported?
This papers finds evidence of fractional integration for a number of monthly ex post real interest rate series using the GPH semiparametric estimator on data from fourteen European countries and the US. However, we pose empirical questions on certain time series requirements that emerge from fractional integration and we find that they do not hold pointing to ¿spurious¿ long memory and casting doubts with respect to the theoretical origins of long memory in our sample. Common stochastic trends expressed as the sum of stationary past errors do not seem appropriate as an explanation of real interest rate covariation. From an economic perspective, our results suggest that most European countries show higher speed of real interest rate equalization with Germany rather than the US.
|Date of creation:||Jan 2005|
|Date of revision:|
|Publication status:||Published by Ivie|
|Contact details of provider:|| Postal: C/ Guardia Civil, 22, Esc 2a, 1o, E-46020 VALENCIA|
Phone: +34 96 319 00 50
Fax: +34 96 319 00 55
Web page: http://www.ivie.es/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Christensen, Michael, 2000. "Uncovered Interest Parity and Policy Behavior New Evidence," Finance Working Papers 00-2, University of Aarhus, Aarhus School of Business, Department of Business Studies.
- Baxter, Marianne, 1994. "Real exchange rates and real interest differentials: Have we missed the business-cycle relationship?," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 5-37, February.
- Mark J. Holmes, 2002. "Exchange rate regimes and economic convergence in the European Union," Journal of Economic Studies, Emerald Group Publishing, vol. 29(1), pages 6-20, January.
- Wynne, Mark A & Koo, Jahyeong, 2000. "Business Cycles under Monetary Union: A Comparison of the EU and US," Economica, London School of Economics and Political Science, vol. 67(267), pages 347-74, August.
- Duarte, Agustin & Holden, Ken, 2003. "The business cycle in the G-7 economies," International Journal of Forecasting, Elsevier, vol. 19(4), pages 685-700.
- Christensen, Michael, 2000. "Uncovered interest parity and policy behavior: new evidence," Economics Letters, Elsevier, vol. 69(1), pages 81-87, October.
- Tsay, Wen-Jen, 2000. "Long memory story of the real interest rate," Economics Letters, Elsevier, vol. 67(3), pages 325-330, June.
- Adrian W. Throop, 1994. "International financial market integration and linkages of national interest rates," Economic Review, Federal Reserve Bank of San Francisco, pages 3-18.
When requesting a correction, please mention this item's handle: RePEc:ivi:wpasad:2005-01. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Departamento de Edición)
If references are entirely missing, you can add them using this form.