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The real interest rate differential : international evidence based on non-linear unit root tests.

This paper aims at testing international parity conditions by using non-linear unit root tests advocated by Kapetanios et al. (2003, KSS). Results from the KSS tests based on 17 countries (G7 and 10 Asian countries) overwhelmingly show that the adjustment of real interest rates towards real interest...

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Main Authors: Baharumshah, Ahmad Zubaidi, Liew, Venus Khim-Sen, Chan, Tze Haw
Format: Article
Language:English
English
Published: Blackwell Publishing Ltd 2009
Online Access:http://psasir.upm.edu.my/id/eprint/17287/1/The%20real%20interest%20rate%20differential.pdf
http://psasir.upm.edu.my/id/eprint/17287/
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spelling my.upm.eprints.172872015-09-03T06:53:41Z http://psasir.upm.edu.my/id/eprint/17287/ The real interest rate differential : international evidence based on non-linear unit root tests. Baharumshah, Ahmad Zubaidi Liew, Venus Khim-Sen Chan, Tze Haw This paper aims at testing international parity conditions by using non-linear unit root tests advocated by Kapetanios et al. (2003, KSS). Results from the KSS tests based on 17 countries (G7 and 10 Asian countries) overwhelmingly show that the adjustment of real interest rates towards real interest rate parity (RIP) follows a non-linear process except for the Taiwan, Hong Kong and Philippines relationships with both the USA and Japan. Overall, the empirical results are in favour of RIP using theUSAand Japan as the centre countries but only if non-linearities are accounted for in the data-generating process. Our findings confirmthat interest rate differentials, like the real exchange rates reported in recent literature, display a non-linear mean reversion process. Blackwell Publishing Ltd 2009 Article PeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/17287/1/The%20real%20interest%20rate%20differential.pdf Baharumshah, Ahmad Zubaidi and Liew, Venus Khim-Sen and Chan, Tze Haw (2009) The real interest rate differential : international evidence based on non-linear unit root tests. Bulletin of Economic Research, 61 (1). pp. 83-94. ISSN 1467-8586 10.1111/j.1467-8586.2008.00288.x English
institution Universiti Putra Malaysia
building UPM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Putra Malaysia
content_source UPM Institutional Repository
url_provider http://psasir.upm.edu.my/
language English
English
description This paper aims at testing international parity conditions by using non-linear unit root tests advocated by Kapetanios et al. (2003, KSS). Results from the KSS tests based on 17 countries (G7 and 10 Asian countries) overwhelmingly show that the adjustment of real interest rates towards real interest rate parity (RIP) follows a non-linear process except for the Taiwan, Hong Kong and Philippines relationships with both the USA and Japan. Overall, the empirical results are in favour of RIP using theUSAand Japan as the centre countries but only if non-linearities are accounted for in the data-generating process. Our findings confirmthat interest rate differentials, like the real exchange rates reported in recent literature, display a non-linear mean reversion process.
format Article
author Baharumshah, Ahmad Zubaidi
Liew, Venus Khim-Sen
Chan, Tze Haw
spellingShingle Baharumshah, Ahmad Zubaidi
Liew, Venus Khim-Sen
Chan, Tze Haw
The real interest rate differential : international evidence based on non-linear unit root tests.
author_facet Baharumshah, Ahmad Zubaidi
Liew, Venus Khim-Sen
Chan, Tze Haw
author_sort Baharumshah, Ahmad Zubaidi
title The real interest rate differential : international evidence based on non-linear unit root tests.
title_short The real interest rate differential : international evidence based on non-linear unit root tests.
title_full The real interest rate differential : international evidence based on non-linear unit root tests.
title_fullStr The real interest rate differential : international evidence based on non-linear unit root tests.
title_full_unstemmed The real interest rate differential : international evidence based on non-linear unit root tests.
title_sort real interest rate differential : international evidence based on non-linear unit root tests.
publisher Blackwell Publishing Ltd
publishDate 2009
url http://psasir.upm.edu.my/id/eprint/17287/1/The%20real%20interest%20rate%20differential.pdf
http://psasir.upm.edu.my/id/eprint/17287/
_version_ 1643826470867435520
score 13.211869

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