Fin de Siecle Real Interest Parity

Eiji Fujii and Menzie Chinn

No 7880, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We evaluate the recent evidence for real interest parity, focusing on long-term yields. Examining the data on financial instruments of various maturities across the G7 countries, we find substantial differences in the degree of real interest equalization measured at different horizons. In general, real interest parity holds better at long horizons than at short. This empirical result is robust to alternative ways of modeling expected inflation rates. Considering the relevance of long-term yields for the investment decisions of firms, our findings imply that the degree of capital mobility among the G-7 economies may be greater than previously thought.

JEL-codes: F21 F31 (search for similar items in EconPapers)
Date: 2000-09
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Published as Fujii, Eiji and Menzie Chinn. "Fin De Siecle Real Interest Parity," Journal of International Financial Markets, Institutions and Money, 2001, v11(3-4,Sep), 289-308.

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