INTERNATIONAL EVIDENCE ON REAL INTEREST RATE PERSISTENCE

Date

2015-09-01

Author

ÖZDEMİR, ZEYNEL ABİDİN
Ekinci, Cagdas
Gokmenoglu, Korhan

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This paper investigates the persistency in the ex-post real 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 the ex-post real 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.

Subject Keywords

Real interest rate, Structural breaks, Persistence, Grid-bootstrap, Half-life

URI

https://hdl.handle.net/11511/67020

Journal

SINGAPORE ECONOMIC REVIEW

DOI

https://doi.org/10.1142/s0217590815500873

Collections

Department of Computer Engineering, Article

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Citation Formats

Z. A. ÖZDEMİR, C. Ekinci, and K. Gokmenoglu, “INTERNATIONAL EVIDENCE ON REAL INTEREST RATE PERSISTENCE,” SINGAPORE ECONOMIC REVIEW, pp. 0–0, 2015, Accessed: 00, 2020. [Online]. Available: https://hdl.handle.net/11511/67020.