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) 
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 ().