Parity reversion in real interest rate in the Asian countries: Further evidence based on local-persistent model
Ahmad Zubaidi Baharumshah (),
Siew-Voon Soon () and
Nor Aishah Hamzah
Economic Modelling, 2013, vol. 35, issue C, 634-642
This paper examines the validity of real interest parity (RIP) for 10 Asian economies over the period 1977–2012 (quarterly frequency). The evidence based on two-break unit root tests reveals that majority of the real interest rate differentials (RIDs) with respect to Germany and the US are stationary, but this appears not to be the case for the Japan-based RIDs. Contrary to these results, the point estimates and the confidence intervals (CIs) of half-lives based on the Phillips et al.'s (2001) local-persistent model provide a clear-cut conclusion on RIP: Most of the RIDs take less than a year to adjust back to their respective equilibrium values, with notably tighter CIs than what has been suggested by earlier literature.
Keywords: Real interest rate parity; Structural breaks; Half-lives; Local-persistent model (search for similar items in EconPapers)
JEL-codes: C1 F21 F36 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:35:y:2013:i:c:p:634-642
Access Statistics for this article
Economic Modelling is currently edited by S. Hall and P. Pauly
More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().