Is There a Unit Root in East-Asian Short-Term Interest Rates?

Chew Chua and Sandy Suardi (s.suardi@economics.uq.edu.au)
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Sandy Suardi: School of Economics, The University of Queensland

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: This paper tests for the presence of nonlinear dynamics in selected Asian short rates and employs a regime varying unit root test to detect non-stationarity for distinct regimes. Nonlinearities in the form of Markov-switching dynamics are found in all short rates sample. The mean-reverting behaviour of interest rates is dependent on both the level and volatility of interest rates. The occasional random walk and mean-reverting dynamics of short rates are attributed to the macroeconomic fundamentals, exchange rate regimes and monetary policy objectives in these economies.

Pages: 36 pages
Date: 2005-09
New Economics Papers: this item is included in nep-cba, nep-ets, nep-fmk, nep-mac, nep-mon and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2005n14

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