Citation
Baharumshah, Ahmad Zubaidi and Soon, Siew Voon and Hamzah, Nor Aishah
(2013)
Parity reversion in real interest rate in the Asian countries: further evidence based on local-persistent model.
Economic Modelling, 35.
pp. 634-642.
ISSN 0264-9993; ESSN: 1873-6122
Abstract
This paper examines the validity of real interest parity (RIP) for 10 Asian economies over the period 1977–2012 (quarterly frequency). The evidence based on two-break unit root tests reveals that majority of the real interest rate differentials (RIDs) with respect to Germany and the US are stationary, but this appears not to be the case for the Japan-based RIDs. Contrary to these results, the point estimates and the confidence intervals (CIs) of half-lives based on the Phillips et al.'s (2001) local-persistent model provide a clear-cut conclusion on RIP: Most of the RIDs take less than a year to adjust back to their respective equilibrium values, with notably tighter CIs than what has been suggested by earlier literature.
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Additional Metadata
| Item Type: | Article |
|---|---|
| Divisions: | Faculty of Economics and Management |
| DOI Number: | https://doi.org/10.1016/j.econmod.2013.08.024 |
| Publisher: | Elsevier |
| Keywords: | Real interest rate parity; Structural breaks; Half-lives; Local-persistent model |
| Depositing User: | Nabilah Mustapa |
| Date Deposited: | 25 Jul 2015 12:38 |
| Last Modified: | 24 Aug 2015 01:22 |
| Altmetrics: | http://www.altmetric.com/details.php?domain=psasir.upm.edu.my&doi=10.1016/j.econmod.2013.08.024 |
| URI: | http://psasir.upm.edu.my/id/eprint/28300 |
| Statistic Details: | View Download Statistic |
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