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Evidence of persistence in U.S. short and long-term interest rates

Luis Gil-Alana (), Juncal Cuñado () and Rangan Gupta ()

Journal of Policy Modeling, 2017, vol. 39, issue 5, 775-789

Abstract: This study examines the time series behavior of U.S. short- and long-run real ex-post interest rates within a long memory approach with non-linear trends using a long span of monthly and annual data. Overall, our results suggest that U.S. real interest rates are not as persistent as suggested in the literature. The implications of this result are relevant to evaluate both the effectiveness of policy interventions and the theoretical implications of different macroeconomic and financial models. For example, our results are consistent with the main implications of the consumption-based asset pricing models and the Fisher effect. Furthermore, the results point out to the difficulties of the monetary policy to influence interest rates, mainly in the long-run, and thus, highlighting varied interest rate policies across short and long-runs when it comes to affecting the real economy.

Keywords: Interest rates; US; Long memory; Non-linear trends; Policy implications (search for similar items in EconPapers)
JEL-codes: C22 E43 G12 (search for similar items in EconPapers)
Date: 2017
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