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International Evidence On Real Interest Rate Persistence

Author

Listed:
  • ZEYNEL ABIDIN OZDEMIR

    (Gazi University, Department of Economics, Besevler 06500, Ankara, Turkey)

  • CAGDAS EKINCI

    (Middle East Technical University, Department of Computer Engineering, Cankaya 06800, Ankara, Turkey)

  • KORHAN GOKMENOGLU

    (Eastern Mediterranean University, Department of Banking and Finance, Famagusta, Northern Cyprus, Cyprus)

Abstract

This paper investigates the persistency in theex-postreal interest rates in the presence of endogenous structural breaks for Australia, Austria, Belgium, Canada, Denmark, France, Germany, Ireland, Italy, the Netherlands, New Zealand, Norway, Switzerland, the UK and the USA using seasonally adjusted quarterly data. The procedure used in this study extends the previous research in the respect of investigating degree of persistency of theex-postreal interest rates series by allowing for possible process shifts at endogenously determined more than two structural breaks dates following the principles suggested by Lumsdaine and Papell (1997). The results from the study show that real interest rates are very persistent when such breaks are not taken into account. However, the findings also indicate low persistency in real interest rates for all countries when such breaks are allowed in the data-generating process. We find that endogenously determined structural breaks substantially reduce the degree of persistency of the real interest rate series, which has important theoretical implications as well.

Suggested Citation

  • Zeynel Abidin Ozdemir & Cagdas Ekinci & Korhan Gokmenoglu, 2015. "International Evidence On Real Interest Rate Persistence," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 60(04), pages 1-14.
    • Handle: RePEc:wsi:serxxx:v:60:y:2015:i:04:n:s0217590815500873
    DOI: 10.1142/S0217590815500873
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Real interest rate; structural breaks; persistence; grid-bootstrap; half-life; C22; E4;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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