Evidence of long memory in short-term interest rates

Margaret R. Maier and Nigel Meade
Additional contact information
Margaret R. Maier: Department of Trade and Industry, London, UK, Postal: Department of Trade and Industry, London, UK
Nigel Meade: The Business School, Imperial College London, UK, Postal: The Business School, Imperial College London, UK

Journal of Forecasting, 2003, vol. 22, issue 8, 553-568

Abstract: The issues of non-stationarity and long memory of real interest rates are examined here. Autoregressive models allowing short-term mean reversion are compared with fractional integration models in terms of their ability to explain the behaviour of the data and to forecast out-of-sample. The data used are weekly observations of 3-month Eurodeposit rates for 10 countries, adjusted for inflation, for 14 years. Following Brenner, Harjes and Kroner, the volatility of these rates is shown to both exhibit GARCH effects and depend on the level of interest rates. Although relatively little support is found for the hypothesis of mean reversion, evidence of long memory in interest rate changes is found for seven countries. The out-of-sample forecasting performance for a year ahead of the fractional integrated models was significantly better than a no change. Copyright © 2003 John Wiley & Sons, Ltd.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
http://hdl.handle.net/10.1002/for.873 Link to full text; subscription required (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:jof:jforec:v:22:y:2003:i:8:p:553-568

DOI: 10.1002/for.873

Access Statistics for this article

Journal of Forecasting is currently edited by Derek W. Bunn

More articles in Journal of Forecasting from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().