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An Empirical Investigation into the International Real Interest Rate Linkages

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  • Bagher Modjtahedi

Abstract

Linear dynamic stochastic processes are derived for the ex ante real interest rates from those followed by the ex post real rates under the identifying assumption of rational expectations. The technique is used to study instantaneous and lagged effects of U.S. ex ante real rates on a number of OECD ex ante real rates. The author finds significant contemporaneous correlations between ex ante real rates. In the long run, however, real rates seem to be insulated.

Suggested Citation

  • Bagher Modjtahedi, 1987. "An Empirical Investigation into the International Real Interest Rate Linkages," Canadian Journal of Economics, Canadian Economics Association, vol. 20(4), pages 832-854, November.
    • Handle: RePEc:cje:issued:v:20:y:1987:i:4:p:832-54
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    Cited by:

    1. Darren Pain & Ryland Thomas, 1997. "Real Interest Rate Linkages: Testing for Common Trends and Cycles," Bank of England working papers 65, Bank of England.
    2. Imad Moosa & Razzaque Bhatti, 1997. "Are Asian Markets Integrated? Evidence for Six Countries Vis-A-Vis Japan," International Economic Journal, Taylor & Francis Journals, vol. 11(1), pages 51-67.
    3. Keshab Shrestha & Kok Tan, 2005. "Real Interest Rate Parity: Long-Run and Short-Run Analysis Using Wavelets," Review of Quantitative Finance and Accounting, Springer, vol. 25(2), pages 139-157, September.

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