Examining real interest parity: Which component reverts quickest and in which regime?

Sirichand, Kavita; Vivian, Andrew; Wohar, Mark E.

doi:10.1016/j.irfa.2015.01.007

International Review of Financial Analysis

2015

DOI: 10.1016/j.irfa.2015.01.007

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Examining real interest parity: Which component reverts quickest and in which regime?

Kavita Sirichand

Andrew Vivian

Mark E. Wohar

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Cited by 7 publications

(1 citation statement)

References 30 publications

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“… See Neely and Rapach (2008), andSirichand et al (2015) for an extensive review of the RIP literature.…”

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confidence: 99%

Smooth breaks and nonlinear mean reversion in real interest parity: Evidence from East Asian countries

Gulcu

Yıldırım

2019

The Journal of International Trade & Economic Development

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This study aims to explore the empirical validity of the real interest rate parity (RIP) hypothesis for East Asian countries using Japan as the base country. To this end, we employ the recently proposed unit root tests of Christopoulos and Leon-Ledesma (2010) that account for both multiple smooth structural breaks of unknown form and nonlinear mean reversion in the series. Our empirical results uncover overwhelming evidences in favor of the RIP hypothesis for the whole countries in our sample. More specifically, through a Fourier approximation, it is observed that all real interest rate differentials display a mean reverting behavior around an infrequently smooth-breaking mean, with the breaks being in accordance with the financial reforms and economic crises witnessed by the countries. Moreover, the degree of mean reversion appears to vary nonlinearly with the size of real interest rate appreciations and depreciations.

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“… See Neely and Rapach (2008), andSirichand et al (2015) for an extensive review of the RIP literature.…”

mentioning

confidence: 99%

Smooth breaks and nonlinear mean reversion in real interest parity: Evidence from East Asian countries

Gulcu

Yıldırım

2019

The Journal of International Trade & Economic Development

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On real interest rate convergence among G7 countries

Riedel

2019

Empir Econ

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Real interest rate parity in the Pacific Rim countries: new empirical evidence

Xie

Chen

2022

Empir Econ

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Examining real interest parity: Which component reverts quickest and in which regime?

Cited by 7 publications

References 30 publications

Smooth breaks and nonlinear mean reversion in real interest parity: Evidence from East Asian countries

Smooth breaks and nonlinear mean reversion in real interest parity: Evidence from East Asian countries

On real interest rate convergence among G7 countries

Real interest rate parity in the Pacific Rim countries: new empirical evidence

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