Non-linear convergence in Asian interest rates and inflation rates

Khalid Kisswani and Salah Nusair

MPRA Paper from University Library of Munich, Germany

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.

Keywords: interest rates convergence; inflation convergence; nonlinear unit root tests (search for similar items in EconPapers)
JEL-codes: E31 E43 (search for similar items in EconPapers)
Date: 2011-07-12
New Economics Papers: this item is included in nep-cba, nep-cis, nep-mac, nep-mon and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:34179

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