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The long memory story of ex post real interest rates. Can it be supported?

Author

Listed:
  • Ioannis A. Venetis

    (Centre of Planning & Economic Research KEPE , Hippokratous 22, 106 80 Athens, Greece)

  • Agustin Duarte

    (Departamento Economia Aplicada y Politica Economica, University of Alicante, 03080 Alicante)

  • Ivan Paya

    (Departamento Fundamento Analisis Economico, University of Alicante, 03080 Alicante)

Abstract

This papers finds evidence of fractional integration for a number of monthly ex post real interest rate series using the GPH semiparametric estimator on data from fourteen European countries and the US. However, we pose empirical questions on certain time series requirements that emerge from fractional integration and we find that they do not hold pointing to “spurious” long memory and casting doubts with respect to the theoretical origins of long memory in our sample. Common stochastic trends expressed as the sum of stationary past errors do not seem appropriate as an explanation of real interest rate covariation.

Suggested Citation

  • Ioannis A. Venetis & Agustin Duarte & Ivan Paya, 2004. "The long memory story of ex post real interest rates. Can it be supported?," Econometrics 0404004, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpem:0404004
    Note: Type of Document - pdf; pages: 18. Preliminary version. Please do not quote without authors permission. All comments welcome
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    References listed on IDEAS

    as
    1. Robinson, Peter M. & Yajima, Yoshihiro, 2002. "Determination of cointegrating rank in fractional systems," Journal of Econometrics, Elsevier, vol. 106(2), pages 217-241, February.
    2. Stilianos Fountas & Jyh‐lin Wu, 1999. "Testing For Real Interest Rate Convergence In European Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(2), pages 158-174, May.
    3. repec:bla:scotjp:v:46:y:1999:i:2:p:158-74 is not listed on IDEAS
    4. Adrian W. Throop, 1994. "International financial market integration and linkages of national interest rates," Economic Review, Federal Reserve Bank of San Francisco, pages 3-18.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Real interest rate; Long memory; Fractional Integration;
    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
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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