On Mean Reversion in Real Interest Rates: An Application of Threshold Cointegtation

Jumah, Adusei and Kunst, Robert M. (January 2002) On Mean Reversion in Real Interest Rates: An Application of Threshold Cointegtation. IHS Economics Series 109

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Abstract or Table of Contents

Abstract: Using data from Germany, Japan, UK, and the U.S., we explore possible threshold cointegration in nominal short- and long-run interest rates with corresponding inflation rates. Traditional cointegration implies perfect mean reversion in real rates and hence confirms the Fisher hypothesis. Threshold cointegration accounts for the possibility that this mean reversion is active only conditional on certain threshold values in the observed variables. We investigate whether findings of such effects can be exploited for interest rate prediction.;

Item Type: IHS Series
Keywords: 'Nonlinear time series' 'Fisher equation' 'Yield spread' 'Forecasting'
Classification Codes (e.g. JEL): C32, C53, E43
Status: Published
Date Deposited: 26 Sep 2014 10:37
Last Modified: 20 Jul 2017 18:17
URI: http://irihs.ihs.ac.at/id/eprint/1404

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