How did the Financial Crisis affect the Real Interest Rate Dynamics in Europe?

Nektarios Aslanidis and Selva Demiralp

Working Papers from Universitat Rovira i Virgili, Department of Economics

Abstract: We investigate the effects of the financial crisis on the stationarity of real interest rates in the Euro Area. We use a new unit root test developed by Peseran et al. (2013) that allows for multiple unobserved factors in a panel set up. Our results suggest that while short-term and long-term real interest rates were stationary before the financial crisis, they became nonstationary during the crisis period likely due to persistent risk that characterized financial markets during that time. JEL codes: E43, C23. Keywords: Real interest rates, Euro Area, financial crisis, panel unit root tests, cross-sectional dependence.

Keywords: Tipus d'interès; Anàlisi de dades de panel; Crisi financera global; 2007-2009; Eurozona; 33 - Economia (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-cba, nep-eec and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:urv:wpaper:2072/211885

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