On real interest rate persistence: the role of breaks

Alfred Haug ()
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Alfred Haug: Department of Economics, University of Otago, New Zealand

No 65, Working Papers from Department of Applied Econometrics, Warsaw School of Economics

Abstract: The role of structural breaks in long spans of ex-post real interest rates for ten industrialized countries is studied. First, the persistence of the real interest is assessed with newly proposed low-frequency tests of M¨uller and Watson (2008). Second, the test of Leybourne et al. (2007) for a change in persistence of a time-series is applied to the real interest rate. The results show that real interest rates over the full sample period do not fit a covariance-stationary or unit-root model, nor a fractionally-integrated, near-unit-root or local-level model. The persistence of real rates changes and there are periods when the real rate is covariance stationary and other periods when it follows a unit root process instead. Also, the breaks reflect structural changes in the inflation rate, which are likely due to changes in monetary policy regimes.

Keywords: Real interest rates; persistence of a time series; breaks in persistence (search for similar items in EconPapers)
JEL-codes: C22 E43 (search for similar items in EconPapers)
Pages: 17
Date: 2012-11-06
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: On real interest rate persistence: the role of breaks (2014)
Working Paper: On Real Interest Rate Persistence: The Role of Breaks (2013)
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