This study examines the long-term persistence in ex ante real interest rates. According to the long-run Fisher effect, ex ante real ratesรthe difference between nominal rates and expected inยฏationรshould be mean-reverting and have no unit root. Empirical evidence on mean reversion has been mixed and
โฆ LIBER โฆ
Near unit roots, cointegration, and the term structure of interest rates
โ Scribed by Markku Lanne
- Publisher
- John Wiley and Sons
- Year
- 2000
- Tongue
- English
- Weight
- 180 KB
- Volume
- 15
- Category
- Article
- ISSN
- 0883-7252
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In this paper we examine the relationship between the term structure of interest rates for six major European Union countries, to discover if the Exchange Rate Mechanism has lead to a converging of domestic term structures. We test this hypothesis using a model of international interest rate parity