6533b85dfe1ef96bd12be5eb

RESEARCH PRODUCT

DOES REAL INTEREST RATE PARITY HOLD FOR OECD COUNTRIES? NEW EVIDENCE USING PANEL STATIONARITY TESTS WITH CROSS-SECTION DEPENDENCE AND STRUCTURAL BREAKS

Mariam CamareroCecilio TamaritJosep Lluís Carrion-i-silvestre

subject

Economics and EconometricsSociology and Political ScienceFinancial economicsmedia_common.quotation_subjectEconometric methodsOecd countriesInterest rateEconomic cooperationEconometricsEconomicsReal interest rateParity (mathematics)media_commonPanel data

description

This paper tests for real interest rate parity (RIRP) among the 17 major Organisation for Economic Cooperation and Development countries over the period 1978:Q1–2006:Q1. The econometric methods applied consist of combining the use of panel data tests that are valid under cross-section dependence and the presence of multiple structural breaks. This feature is important because the misspecification errors due to not accounting for structural breaks and/or cross-section dependence can lead to misleading conclusions. Our results support the fulfilment of the weak version of the RIRP for short-term interest rate differentials once dependence and structural breaks are considered.

yearjournalcountryeditionlanguage
2010-09-01Scottish Journal of Political Economy
https://doi.org/10.1111/j.1467-9485.2010.00531.x