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Alternative Approaches to Modeling Time Variation in the Case of the U.S. Real Interest Rate

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  • Bekdache, Basma

Abstract

This paper compares three approaches for modeling time variation in the U.S. real interest rate: a three-state Markov switching model as estimated by Garcia and Perron (1994), a random-walk model with two-state Markov switching variance, and a time-varying parameter model with two-state Markov switching variance. The findings are generally supportive of modeling continual change in the mean of the real rate process rather than employing a model that limits variation in the mean to a specified number of states. Citation Copyright 1998 by Kluwer Academic Publishers.

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  • Bekdache, Basma, 1998. "Alternative Approaches to Modeling Time Variation in the Case of the U.S. Real Interest Rate," Computational Economics, Springer;Society for Computational Economics, vol. 11(1-2), pages 41-51, April.
    • Handle: RePEc:kap:compec:v:11:y:1998:i:1-2:p:41-51
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    Cited by:

    1. Kanas, Angelos, 2008. "On real interest rate dynamics and regime switching," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2089-2098, October.
    2. Nguyen Bao Anh & Yiqiang Q. Zhao, 2021. "Half Century of Gold Price: Regime-Switching and Forecasting Framework," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(3), pages 1-18, May.

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