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The long memory story of ex post real interest rates. Can it be supported?

  • Ioannis A. Venetis

    (Centre of Planning & Economic Research KEPE , Hippokratous 22, 106 80 Athens, Greece)

  • Agustin Duarte

    (Departamento Economia Aplicada y Politica Economica, University of Alicante, 03080 Alicante)

  • Ivan Paya

    (Departamento Fundamento Analisis Economico, University of Alicante, 03080 Alicante)

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.

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File URL: http://econwpa.repec.org/eps/em/papers/0404/0404004.pdf
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Paper provided by EconWPA in its series Econometrics with number 0404004.

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Length: 18 pages
Date of creation: 28 Apr 2004
Date of revision:
Handle: RePEc:wpa:wuwpem:0404004
Note: Type of Document - pdf; pages: 18. Preliminary version. Please do not quote without authors permission. All comments welcome
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Robinson, Peter M. & Yajima, Yoshihiro, 2002. "Determination of cointegrating rank in fractional systems," Journal of Econometrics, Elsevier, vol. 106(2), pages 217-241, February.
  2. Stilianos Fountas & Jyh-lin Wu, 1998. "Testing for Real Interest Rate Convergence in European Countries," Working Papers 24, National University of Ireland Galway, Department of Economics, revised 1998.
  3. 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.
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