Reconsidering Real Interest Parity for Traded and Nontraded Goods
Review of International Economics, 2006, vol. 14, issue 2, 306-315
The goal of this paper is to examine the hypothesis of real interest rate parity by contrasting real interest rates across traded and nontraded goods under flexible exchange rates. We employ panel unit root tests to investigate the stationarity of real interest rate differentials. In particular, empirical results support the mean‐reverting property of real interest rate differentials for interest rates measured in terms of traded goods.
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