Real Interest Parity in New Europe
In this paper we investigate the real interest parity condition in ten Eastern European transition countries during 1997-2009 period. Our sample is interesting for three reasons: It covers the second stage of economic transition in the aftermath of the collapse of socialism; the establishment of Euroland at the turn of the century: and enlargement of Euroland to include the Eastern European countries of Slovenia and Slovakia. The data enables us to investigate how the introduction of market mechanisms in the early nineties and the establishment and enlargement of Euroland acted on real interest rate convergence. We test the real interest parity condition with unit root test with and without structural breaks. Inflationary expectations are estimated in two ways: (i) under assumption of rational expectations with ex-post inflation rates and (ii) with ex-ante estimated inflation expectation using ARIMA/ARCH model. Preliminary results suggest that there is a strong evidence of stationarity and relatively weaker evidence of structural breaks.
|Date of creation:||08 Dec 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +385 1 233-5633
Fax: +385 1 238-3333
Web page: http://www.efzg.hr
More information through EDIRC
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.:
- Michael G. Arghyrou & Andros Gregoriou & Alexandros Kontonikas, 2007.
"Do real interest rates converge? Evidence from the European Union,"
2007_21, Business School - Economics, University of Glasgow.
- Arghyrou, Michael G. & Gregoriou, Andros & Kontonikas, Alexandros, 2009. "Do real interest rates converge? Evidence from the European union," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(3), pages 447-460, July.
- Arghyrou, Michael G & Gregoriou, Andros & Kontonikas, Alexandros, 2007. "Do real interest rates converge? Evidence from the European Union," Cardiff Economics Working Papers E2007/26, Cardiff University, Cardiff Business School, Economics Section.
- Jeffrey Frankel & Jumana Poonawala, 2006.
"The Forward Market in Emerging Currencies: Less Biased Than in Major Currencies,"
NBER Working Papers
12496, National Bureau of Economic Research, Inc.
- Frankel, Jeffrey & Poonawala, Jumana, 2010. "The forward market in emerging currencies: Less biased than in major currencies," Journal of International Money and Finance, Elsevier, vol. 29(3), pages 585-598, April.
- Frankel, Jeffrey & Poonawala, Jumana, 2009. "The Forward Market in Emerging Currencies: Less Biased Than in Major Currencies," Working Paper Series rwp09-023, Harvard University, John F. Kennedy School of Government.
- Frankel, Jeffrey A. & Poonawala, Jumana, 2009. "The Forward Market in Emerging Currencies: Less Biased than in Major Currencies," Scholarly Articles 4448888, Harvard Kennedy School of Government.
- Junsoo Lee & Mark C. Strazicich, 2004.
"Minimum LM Unit Root Test with One Structural Break,"
04-17, Department of Economics, Appalachian State University.
- Junsoo Lee & Mark C. Strazicich, 2013. "Minimum LM unit root test with one structural break," Economics Bulletin, AccessEcon, vol. 33(4), pages 2483-2492.
- Tom Doan, . "LSUNIT: RATS procedure to implement Lee-Strazicich unit root tests with one or more structural breaks," Statistical Software Components RTS00112, Boston College Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:zag:wpaper:1011. 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: (WPS)
If references are entirely missing, you can add them using this form.