Testing the Real Interest Parity Hypothesis in Six Developed Countries
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Li, Bin
Alexiadis, Sam
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Abstract
In this paper, we conduct unit-root tests (including ADF, PP, KPSS and DF-GLS tests) on the ex post real interest rates in six developed countries (Canada, France, Japan, Italy, Singapore, the UK against the US). We also use real interest rate differential (RID) to examine whether real interest rate parity holds in these countries. Our result supports that real interest rates are mean reverting and the real interest parity (RIP) hypothesis holds in the majority of the chosen countries.
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International Research Journal of Finance and Economics
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2012
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86
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© 2012 EuroJournals Publishing, Inc. The attached file is reproduced here in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.
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Subject
Applied economics
Econometrics
Banking, finance and investment
Financial econometrics