On Real Interest Rate Persistence: The Role of Breaks

Alfred Haug

No 1303, Working Papers from University of Otago, Department of Economics

Abstract: The role of structural breaks in long spans of ex-post real interest rates for ten industrialized countries is studied. First, the persistence of the real interest is assessed with newly proposed low-frequency tests of Muller and Watson (2008). Second, the test of Leybourne et al. (2007) for a change in persistence of a time-series is applied to the real interest rate. The results show that real interest rates over the full sample period do not fit a covariance-stationary or unit-root model, nor a fractionally-integrated, near-unit-root or local-level model. Instead, the persistence of real rates changes over time and there are periods when the real rate is covariance stationary and other periods when it follows a unit root process.

Keywords: Real interest rates; persistence of a time series; breaks in persistence (search for similar items in EconPapers)
JEL-codes: C22 E43 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2013-01, Revised 2013-01
New Economics Papers: this item is included in nep-mac
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http://www.otago.ac.nz/economics/research/otago076637.pdf First version, 2013 (application/pdf)

Related works:
Journal Article: On real interest rate persistence: the role of breaks (2014)
Working Paper: On real interest rate persistence: the role of breaks (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:otg:wpaper:1303

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