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A Re-examination of the Real Interest Parity Condition Using Threshold Cointegration

Author

Listed:
  • Cooray, Arusha

    (School of Economics and Finance, University of Tasmania)

Abstract

Threshold cointegration is employed in this study to test the real interest parity condition between the UK and the US. Evidence supports the asymmetric adjustment of real interest rates. The threshold error correction models indicate that negative deviations from long run real interest parity are eliminated faster than positive deviations.

Suggested Citation

  • Cooray, Arusha, 2007. "A Re-examination of the Real Interest Parity Condition Using Threshold Cointegration," Working Papers 2139, University of Tasmania, Tasmanian School of Business and Economics, revised Feb 2007.
    • Handle: RePEc:tas:wpaper:2139
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    File URL: http://eprints.utas.edu.au/2139/
    File Function: First version, 2007
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    More about this item

    Keywords

    real interest parity; threshold cointegration; threshold error correction; asymmetric adjustment; non-linear adjustment;
    All these keywords.

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