EconPapers    
Economics at your fingertips  
 

THE REAL INTEREST RATE DIFFERENTIAL: INTERNATIONAL EVIDENCE BASED ON NON‐LINEAR UNIT ROOT TESTS

Ahmad Zubaidi Baharumshah (), Venus Liew and Tze-Haw Chan ()

Bulletin of Economic Research, 2009, vol. 61, issue 1, 83-94

Abstract: This paper aims at testing international parity conditions by using non‐linear unit root tests advocated by Kapetanios et al. (2003, KSS). Results from the KSS tests based on 17 countries (G7 and 10 Asian countries) overwhelmingly show that the adjustment of real interest rates towards real interest rate parity (RIP) follows a non‐linear process except for the Taiwan, Hong Kong and Philippines relationships with both the USA and Japan. Overall, the empirical results are in favour of RIP using the USA and Japan as the centre countries but only if non‐linearities are accounted for in the data‐generating process. Our findings confirm that interest rate differentials, like the real exchange rates reported in recent literature, display a non‐linear mean reversion process.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://doi.org/10.1111/j.1467-8586.2008.00288.x

Related works:
Working Paper: The real interest rate differential: international evidence based on nonlinear unit root tests (2007) Downloads
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:bla:buecrs:v:61:y:2009:i:1:p:83-94

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0307-3378

Access Statistics for this article

More articles in Bulletin of Economic Research from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2025-03-22
Handle: RePEc:bla:buecrs:v:61:y:2009:i:1:p:83-94