The Real Interest Rate Differential : International Evidence Based On Non-Linear Unit Root Tests
This paper aims at testing international parity conditions by using non-linear unit root tests advocated by Kapetanios et al. (2003, KSS). Results from the KSS tests based on 17 countries (G7 and 10 Asian countries) overwhelmingly show that the adjustment of real interest rates towards real interest...
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| Format: | Article |
| Language: | English |
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Blackwell Publishing Ltd
2009
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| Online Access: | http://ir.unimas.my/id/eprint/18624/ http://ir.unimas.my/id/eprint/18624/7/THE%20REAL%20INTEREST%20RATE%20DIFFERENTIAL%20%28ABSTRACT%29.pdf |
| _version_ | 1848838552729681920 |
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| author | Ahmad Zubaidi, Baharumshah Liew Venus, Khim Sen Chan, Tze Haw |
| author_facet | Ahmad Zubaidi, Baharumshah Liew Venus, Khim Sen Chan, Tze Haw |
| author_sort | Ahmad Zubaidi, Baharumshah |
| building | UNIMAS Institutional Repository |
| collection | Online Access |
| description | This paper aims at testing international parity conditions by using non-linear unit root tests advocated by Kapetanios et al. (2003, KSS). Results from the KSS tests based on 17 countries (G7 and 10 Asian countries) overwhelmingly show that the adjustment of real interest rates towards real interest rate parity (RIP) follows a non-linear process except for the Taiwan, Hong Kong and Philippines relationships with both the USA and Japan. Overall, the empirical results are in favour of RIP using the USA and Japan as the centre countries but only
if non-linearities are accounted for in the data-generating process. Our findings confirm that interest rate differentials, like the real exchange rates reported in recent literature, display a non-linear mean reversion process. |
| first_indexed | 2025-11-15T06:57:22Z |
| format | Article |
| id | unimas-18624 |
| institution | Universiti Malaysia Sarawak |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T06:57:22Z |
| publishDate | 2009 |
| publisher | Blackwell Publishing Ltd |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | unimas-186242023-06-14T06:03:23Z http://ir.unimas.my/id/eprint/18624/ The Real Interest Rate Differential : International Evidence Based On Non-Linear Unit Root Tests Ahmad Zubaidi, Baharumshah Liew Venus, Khim Sen Chan, Tze Haw HB Economic Theory This paper aims at testing international parity conditions by using non-linear unit root tests advocated by Kapetanios et al. (2003, KSS). Results from the KSS tests based on 17 countries (G7 and 10 Asian countries) overwhelmingly show that the adjustment of real interest rates towards real interest rate parity (RIP) follows a non-linear process except for the Taiwan, Hong Kong and Philippines relationships with both the USA and Japan. Overall, the empirical results are in favour of RIP using the USA and Japan as the centre countries but only if non-linearities are accounted for in the data-generating process. Our findings confirm that interest rate differentials, like the real exchange rates reported in recent literature, display a non-linear mean reversion process. Blackwell Publishing Ltd 2009 Article PeerReviewed text en http://ir.unimas.my/id/eprint/18624/7/THE%20REAL%20INTEREST%20RATE%20DIFFERENTIAL%20%28ABSTRACT%29.pdf Ahmad Zubaidi, Baharumshah and Liew Venus, Khim Sen and Chan, Tze Haw (2009) The Real Interest Rate Differential : International Evidence Based On Non-Linear Unit Root Tests. Bulletin of Economic Research, 61. pp. 1-12. ISSN 0307-3378 http://onlinelibrary.wiley.com/doi/10.1111/j.1467-8586.2008.00288.x/abstract DOI: 10.1111/j.1467-8586.2008.00288.x |
| spellingShingle | HB Economic Theory Ahmad Zubaidi, Baharumshah Liew Venus, Khim Sen Chan, Tze Haw The Real Interest Rate Differential : International Evidence Based On Non-Linear Unit Root Tests |
| title | The Real Interest Rate Differential : International
Evidence Based On Non-Linear Unit Root Tests |
| title_full | The Real Interest Rate Differential : International
Evidence Based On Non-Linear Unit Root Tests |
| title_fullStr | The Real Interest Rate Differential : International
Evidence Based On Non-Linear Unit Root Tests |
| title_full_unstemmed | The Real Interest Rate Differential : International
Evidence Based On Non-Linear Unit Root Tests |
| title_short | The Real Interest Rate Differential : International
Evidence Based On Non-Linear Unit Root Tests |
| title_sort | real interest rate differential : international
evidence based on non-linear unit root tests |
| topic | HB Economic Theory |
| url | http://ir.unimas.my/id/eprint/18624/ http://ir.unimas.my/id/eprint/18624/ http://ir.unimas.my/id/eprint/18624/ http://ir.unimas.my/id/eprint/18624/7/THE%20REAL%20INTEREST%20RATE%20DIFFERENTIAL%20%28ABSTRACT%29.pdf |