Do real interest rates converge across East Asian countries based on China?

Yan Liu, Hsu-Ling Chang and Chi-Wei Su

Economic Modelling, 2013, vol. 31, issue C, 467-473

Abstract: This study applies the sequential panel selection method (SPSM), proposed by Chortareas and Kapetanios (2009), to assess the non-stationary properties of the real interest rates relative to China for ten East Asian countries. SPSM can classify the whole panel into a group of stationary series and a group of non-stationary series. We clearly identify how many and which series in the panel are stationary processes and provide robust evidence to indicate that RIRP holds true for five countries. It implies that the choices and effectiveness of the monetary and fiscal policies in the East Asian economies will be highly influenced by external factors originating from China. Also, our findings point out that real interest rate convergence relative to China is mean reverting toward RIRP equilibrium values in a non-linear way.

Keywords: Real interest rate parity; Sequential panel selection method; Fourier function (search for similar items in EconPapers)
JEL-codes: C23 F36 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:31:y:2013:i:c:p:467-473

DOI: 10.1016/j.econmod.2012.12.023

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