International evidence on real interest rate persistence

ÖZDEMİR Z. A., Ekinci C., Gokmenoglu K.

Singapore Economic Review, vol.60, no.4, 2015 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 60 Issue: 4
  • Publication Date: 2015
  • Doi Number: 10.1142/s0217590815500873
  • Journal Name: Singapore Economic Review
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Keywords: Real interest rate, structural breaks, persistence, grid-bootstrap, half-life, OIL-PRICE SHOCK, UNIT-ROOT, STOCHASTIC CONSUMPTION, FISHER HYPOTHESIS, GREAT CRASH, INFLATION, TESTS, SHIFTS, NONSTATIONARITY, BEHAVIOR
  • Ankara Haci Bayram Veli University Affiliated: Yes


© 2015 World Scientific Publishing Company.This paper investigates the persistency in the ex-post real interest rates in the presence of endogenous structural breaks for Australia, Austria, Belgium, Canada, Denmark, France, Germany, Ireland, Italy, the Netherlands, New Zealand, Norway, Switzerland, the UK and the USA using seasonally adjusted quarterly data. The procedure used in this study extends the previous research in the respect of investigating degree of persistency of the ex-post real interest rates series by allowing for possible process shifts at endogenously determined more than two structural breaks dates following the principles suggested by Lumsdaine and Papell (1997). The results from the study show that real interest rates are very persistent when such breaks are not taken into account. However, the findings also indicate low persistency in real interest rates for all countries when such breaks are allowed in the data-generating process. We find that endogenously determined structural breaks substantially reduce the degree of persistency of the real interest rate series, which has important theoretical implications as well.