Real Interest Rate Parity: Long-Run and Short-Run Analysis Using Wavelets

Real Interest Rate Parity: Long-Run and Short-Run Analysis Using Wavelets In this article, long-run and short-run relationships among real interest rates in G-7 countries are empirically analyzed. The evidence suggests the existence of long-run relationships among these real interest rates. However, the long-run relationship is not an equality relationship. Short-run relationships are estimated using dynamic simultaneous equation models. They reveal that the real interest rates of non-U.S. G-7 countries react and adjust to long-run disequilibrium conditions. A more detailed analysis based on wavelet transform indicates the existence of both short-run and long-run relationships; however, strict interest rate parity does not seem to hold true. Review of Quantitative Finance and Accounting Springer Journals

Real Interest Rate Parity: Long-Run and Short-Run Analysis Using Wavelets

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Kluwer Academic Publishers
Copyright © 2005 by Springer Science + Business Media, Inc.
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
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