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A panel study on real interest rate parity in East Asian countries: pre- and post-liberalization era


Citation

Baharumshah, Ahmad Zubaidi and Chan, Tze Haw and Fountas, Stilianos (2005) A panel study on real interest rate parity in East Asian countries: pre- and post-liberalization era. Global Finance Journal, 16 (1). pp. 69-85. ISSN 1044-0283; ESSN: 1873-5665

Abstract / Synopsis

This study examines the mean reverting behavior of real interest differentials in ten Asian economies using Japan as the base country. We obtain a number of interesting results: first, the conventional ADF test fails to support Real Interest Parity (RIP) for at least half of the countries, even for the post-financial liberalization period. Second, the evidence based on panel unit root tests demonstrates that real interest rate differentials exhibit mean reverting behavior and are characterized by long-memory dynamics. Finally, the evidence suggests that deviations from RIP have a half-life of approximately 6 to 7 months.


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Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
DOI Number: https://doi.org/10.1016/j.gfj.2005.05.005
Publisher: Elsevier
Keywords: Real interest differentials; Mean-reversion; Half-life; Panel unit root tests
Depositing User: Nabilah Mustapa
Date Deposited: 17 Sep 2015 08:15
Last Modified: 17 Sep 2015 08:15
Altmetrics: http://www.altmetric.com/details.php?domain=psasir.upm.edu.my&doi=10.1016/j.gfj.2005.05.005
URI: http://psasir.upm.edu.my/id/eprint/40297
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