Mean Reversion of Real Interest Rates in G-20: Panel Kss Test by Spsm with a Fourier Function

Chih Kai Chang ()
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Chih Kai Chang: Department of Risk Management and Insurance, Feng Chia University, Taichung, Taiwan.

Journal for Economic Forecasting, 2012, issue 3, 58-68

Abstract: This study applies the Sequential Panel Selection Method (SPSM) to test the mean reversion properties in the real interest rates for the G-20 countries. SPSM classifies the whole panel into a group of stationary countries and a group of non-stationary countries. In doing so, we can clearly identify how many and which series in the panel are stationary processes. Empirical results from the SPSM using the Panel KSS test with a Fourier function indicate that the mean reversion holds true for all G-20 countries. Our results have important policy implications for the G-20 countries under study.

Keywords: Mean Reversion; Real Interest Rate; Sequential Panel Selection Method; G-10 Countries (search for similar items in EconPapers)
JEL-codes: C22 C23 (search for similar items in EconPapers)
Date: 2012
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