Parity reversion in real interest rate in the Asian countries: further evidence based on local-persistent model
This paper examines the validity of real interest parity (RIP) for 10 Asian economies over the period 1977–2012 (quarterly frequency). The evidence based on two-break unit root tests reveals that majority of the real interest rate differentials (RIDs) with respect to Germany and the US are stationar...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
Elsevier
2013
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| Online Access: | http://psasir.upm.edu.my/id/eprint/28300/ http://psasir.upm.edu.my/id/eprint/28300/1/Parity%20reversion%20in%20real%20interest%20rate%20in%20the%20Asian%20countries.pdf |
| _version_ | 1848846078742364160 |
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| author | Baharumshah, Ahmad Zubaidi Soon, Siew Voon Hamzah, Nor Aishah |
| author_facet | Baharumshah, Ahmad Zubaidi Soon, Siew Voon Hamzah, Nor Aishah |
| author_sort | Baharumshah, Ahmad Zubaidi |
| building | UPM Institutional Repository |
| collection | Online Access |
| description | This paper examines the validity of real interest parity (RIP) for 10 Asian economies over the period 1977–2012 (quarterly frequency). The evidence based on two-break unit root tests reveals that majority of the real interest rate differentials (RIDs) with respect to Germany and the US are stationary, but this appears not to be the case for the Japan-based RIDs. Contrary to these results, the point estimates and the confidence intervals (CIs) of half-lives based on the Phillips et al.'s (2001) local-persistent model provide a clear-cut conclusion on RIP: Most of the RIDs take less than a year to adjust back to their respective equilibrium values, with notably tighter CIs than what has been suggested by earlier literature. |
| first_indexed | 2025-11-15T08:57:00Z |
| format | Article |
| id | upm-28300 |
| institution | Universiti Putra Malaysia |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-15T08:57:00Z |
| publishDate | 2013 |
| publisher | Elsevier |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | upm-283002015-08-24T01:22:44Z http://psasir.upm.edu.my/id/eprint/28300/ Parity reversion in real interest rate in the Asian countries: further evidence based on local-persistent model Baharumshah, Ahmad Zubaidi Soon, Siew Voon Hamzah, Nor Aishah This paper examines the validity of real interest parity (RIP) for 10 Asian economies over the period 1977–2012 (quarterly frequency). The evidence based on two-break unit root tests reveals that majority of the real interest rate differentials (RIDs) with respect to Germany and the US are stationary, but this appears not to be the case for the Japan-based RIDs. Contrary to these results, the point estimates and the confidence intervals (CIs) of half-lives based on the Phillips et al.'s (2001) local-persistent model provide a clear-cut conclusion on RIP: Most of the RIDs take less than a year to adjust back to their respective equilibrium values, with notably tighter CIs than what has been suggested by earlier literature. Elsevier 2013-09 Article PeerReviewed application/pdf en http://psasir.upm.edu.my/id/eprint/28300/1/Parity%20reversion%20in%20real%20interest%20rate%20in%20the%20Asian%20countries.pdf Baharumshah, Ahmad Zubaidi and Soon, Siew Voon and Hamzah, Nor Aishah (2013) Parity reversion in real interest rate in the Asian countries: further evidence based on local-persistent model. Economic Modelling, 35. pp. 634-642. ISSN 0264-9993; ESSN: 1873-6122 http://www.sciencedirect.com/science/article/pii/S0264999313003404 10.1016/j.econmod.2013.08.024 |
| spellingShingle | Baharumshah, Ahmad Zubaidi Soon, Siew Voon Hamzah, Nor Aishah Parity reversion in real interest rate in the Asian countries: further evidence based on local-persistent model |
| title | Parity reversion in real interest rate in the Asian countries: further evidence based on local-persistent model |
| title_full | Parity reversion in real interest rate in the Asian countries: further evidence based on local-persistent model |
| title_fullStr | Parity reversion in real interest rate in the Asian countries: further evidence based on local-persistent model |
| title_full_unstemmed | Parity reversion in real interest rate in the Asian countries: further evidence based on local-persistent model |
| title_short | Parity reversion in real interest rate in the Asian countries: further evidence based on local-persistent model |
| title_sort | parity reversion in real interest rate in the asian countries: further evidence based on local-persistent model |
| url | http://psasir.upm.edu.my/id/eprint/28300/ http://psasir.upm.edu.my/id/eprint/28300/ http://psasir.upm.edu.my/id/eprint/28300/ http://psasir.upm.edu.my/id/eprint/28300/1/Parity%20reversion%20in%20real%20interest%20rate%20in%20the%20Asian%20countries.pdf |