Real Interest Rate Parity under Regime Shifts: Evidence for Industrial Countries

Stilianos Fountas and Jyh-lin Wu
Additional contact information
Jyh-lin Wu: Department of Economics, National University of Ireland, Galway

No 30, Working Papers from National University of Ireland Galway, Department of Economics

Abstract: We use recently developed cointegration tests that determine endogenously the regime shift to test for bilateral real interest rate convergence (real interest rate parity) in the G7 against the US in the 1974-1995 period. In contrast with previous studies that employed classical regression analysis and standard cointegration tests, our innovative approach provides strong evidence in favour of bilateral real interest rate convergence between the US and several countries in our sample, in particular for short-term real interest rates. Our results highlight the fact that for a number of countries in our sample (Canada and the UK) monetary policy can act as a stabilisation policy tool through its effect on domestic long-term real interest rates while for others (France and Germany) long-term real interest rate changes are significantly influenced by the US monetary policy stance.

JEL-codes: F3 (search for similar items in EconPapers)
Date: 1998, Revised 1998
References: Add references at CitEc
Citations:

Published in The Manchester School, Vol. 68, No. 6, 2000

Downloads: (external link)
http://www.economics.nuig.ie/resrch/paper.php?pid=35 First version, 1998 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found
http://www.economics.nuig.ie/resrch/paper.php?pid=35 Revised version, 1998 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

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:nig:wpaper:0030

Access Statistics for this paper

More papers in Working Papers from National University of Ireland Galway, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Srinivas Raghavendra ().