The puzzling unit root in the real interest rate and its inconsistency with intertemporal consumption behavior

Long-term persistence in the real intere

Long-term persistence in the real interest rate: some evidence of a fractional unit root

✍ Kon S. Lai 📂 Article 📅 1997 🏛 John Wiley and Sons 🌐 English ⚖ 156 KB 👁 2 views

This study examines the long-term persistence in ex ante real interest rates. According to the long-run Fisher effect, ex ante real ratesÐthe difference between nominal rates and expected in¯ationÐshould be mean-reverting and have no unit root. Empirical evidence on mean reversion has been mixed and