The Behavior of Real Interest Rates: New Evidence from a ``Suprasecular" Perspective
Luis Gil-Alana (),
Rangan Gupta () and
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Giorgio Canarella: University of Nevada, Las Vegas, NV, U.S
Stephen Miller: University of Nevada, Las Vegas, NV, U.S
No 202093, Working Papers from University of Pretoria, Department of Economics
We examine the temporal dynamics of the historical series of real interest rates for a sample of six European countries (Italy, France, Germany, Holland (the Netherlands), Spain pre-1730 and post-1800, and the United Kingdom), the United States and Japan stretching back to the 14th century using fractional integration techniques. We estimate the fractional integration parameter d using the Whittle function in the frequency domain as proposed in Dahlhaus (1989) and implemented by Robinson (1994) for the linear case and Cuestas and Gil-Alana (2016) for the non-linear case in terms of Chebyshev time polynomials. We find evidence of short memory, persistence, and anti-persistence. In the linear case, we find evidence of persistence for France and the United Kingdom and evidence of anti-persistence for Spain pre-1730, Germany, and Italy, while for Holland (the Netherlands), Japan, Spain post-1800, and the United States the evidence favors the short memory hypothesis. Non-linear trend stationarity, however, is found for Spain pre-1739, Germany, Holland (the Netherlands), Japan, Spain, the United Kingdom, and the United States. Among these countries, evidence of anti-persistence is detected for Spain pre-1730, Germany, Holland (the Netherlands), Japan, and the United Kingdom, while Spain post-1800 and the United States exhibit short-memory behavior. Thus, the vast majority of the findings, in sharp contrast with most of the extant literature, support the hypothesis that the behavior of real interest rates is non-linear trend stationary driven by a prolonged damped oscillatory dynamics and not by a high degree of persistence.
Keywords: Anti-persistence; long memory; short memory; Chebyshev polynomials; fractional integration; non-linearity (search for similar items in EconPapers)
JEL-codes: C22 C58 (search for similar items in EconPapers)
Pages: 27 pages
New Economics Papers: this item is included in nep-his
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202093
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