Examining real interest parity: Which component reverts quickest and in which regime?

Kavita Sirichand (), Andrew Vivian and Mark Wohar ()

International Review of Financial Analysis, 2015, vol. 39, issue C, 72-83

Abstract: This article re-examines real interest parity (RIP), focusing upon which component of real interest parity drives convergence to parity. We find that it is the reversion of inflation rather than nominal interest rates which is the primary source of convergence to RIP. Nominal interest rate differentials are found to be persistent during both periods. Furthermore, we additionally find that mean reversion in the inflation differentials is faster during the Gold Standard period.

Keywords: Comovement; Real interest rate parity; Inflation differential; Nominal interest rate differential; Fisher effect; Gold Standard; Floating exchange rate (search for similar items in EconPapers)
JEL-codes: G10 G15 G30 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1057521915000186
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Examining real interest parity: which component reverts quickest and in which regime? (2014)
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:eee:finana:v:39:y:2015:i:c:p:72-83

DOI: 10.1016/j.irfa.2015.01.007

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().