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Re examining the real interest rate parity hypothesis under temporary gradual breaks and nonlinear convergence
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Orientador(es)
Resumo(s)
This paper investigates the real interest parity hypothesis by testing stationarity of real interest rate differentials for 52 countries with respect to the USA. Taking account of the fact that both asymmetric adjustment and gradual temporary breaks may better character ize the dynamics of real interest rate differentials, we propose a new test that allows for two temporary shifts together with asymmetric adjustment towards the equilibrium. We employ the newly proposed test procedure along with the conventional ADF test as well as nonlinear KSS and OSH tests to examine stationarity of real interest rate differentials. Among the main results, we find that the newly proposed unit root test procedure highly outperforms the existing unit root tests in terms of rejecting the null hypothesis of unit root. Our results suggest that real interest rate differentials can be characterized by a stationary process with asymmetric adjustment around gradual and temporary shifts of mean
Descrição
Palavras-chave
RIRP · Multiple smooth breaks ESTR trend ESTAR nonlinearity
Contexto Educativo
Citação
Hasanov, Mübariz; Tolga Omay and Vasif Abioglu .(2024). “Re examining the real interest rate parity hypothesis under temporary gradual breaks and nonlinear convergence”. Portuguese Economic Journal, Vol 23, (3): 355–382
Editora
Springer