Time series behaviour of the real interest rates in transition economies

Pelin Öge Güney, Erdinc Telatar and Mübariz Hasanov

Economic Research-Ekonomska Istraživanja, 2015, vol. 28, issue 1, 104-118

Abstract: Stationarity properties of real interest rates are examined for 21 transition economies. Owing to transaction costs and other frictions, it is quite plausible that we are dealing with potential non-linearities in the real interest rate. Therefore we examine stationarity of the real interest rate allowing for non-linearities and asymmetric adjustment with smooth structural change in the data generating process. Our findings suggest that taking account of non-linearities in the data generating process results in a rejection of the unit root null hypothesis for some countries which seem to be non-stationary according to conventional unit root tests. This finding points to the importance of allowing for both structural breaks and asymmetric adjustment in the real interest rate series of transition countries.

Date: 2015
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Working Paper: Time Series Behaviour of the Real Interest Rates in Transition Economies (2012)
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DOI: 10.1080/1331677X.2015.1028240

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