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Non-linear convergence in Asian interest rates and inflation rates

Author

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  • Kisswani, Khalid/ M.
  • Nusair, Salah/ A.

Abstract

We examine the dynamics of convergence of the ASEAN5 plus the big three for nominal interest rates, inflation rates, and real interest rates. We test for convergence relative to the U.S and Japan, using monthly data over the period January 1990 - December 2010, using non-linear unit root tests. The results show strong evidence of stationary inflation and real interest rate differentials in all but China’s inflation differential relative to the U.S., and stationary nominal interest differentials in most of the cases. We interpret these results as convergence in inflation rates and real interest rates in all cases, and as nominal interest convergence in most of the cases. Moreover, examining the impact of the Asian crisis shows less number of convergences before the crisis and more convergences after the crisis. This suggests that convergence has increased after the 1997/98 Asian crisis, and that the crisis has pulled the economies together.

Suggested Citation

  • Kisswani, Khalid/ M. & Nusair, Salah/ A., 2011. "Non-linear convergence in Asian interest rates and inflation rates," MPRA Paper 34179, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:34179
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    File URL: https://mpra.ub.uni-muenchen.de/34179/1/MPRA_paper_34179.pdf
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    References listed on IDEAS

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    1. repec:agr:journl:v:4(613):y:2017:i:4(613):p:43-52 is not listed on IDEAS
    2. Emmanuel Anoruo & Vasudeva N.R. Murthy, 2014. "Testing Nonlinear Inflation Convergence for the Central African Economic and Monetary Community," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 1-7.

    More about this item

    Keywords

    interest rates convergence; inflation convergence; nonlinear unit root tests;

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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