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http://ssrn.com/abstract=706581
 
 

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Real Interest Rate Stationarity and Per Capita Consumption Growth Rate


Claude Lopez


Banque de France

Javier A. Reyes


University of Arkansas - Sam M. Walton College of Business

January 2007

University of Cincinnati, Economics Working Papers Series
Applied Economics, Forthcoming

Abstract:     
Many economic theories connecting the real interest rate and the per-capita consumption growth rate require that both rates evolve together over time. This paper investigates whether these rates present similar stationary behavior for the seven most industrialized countries over the 1957-2005 period. The analysis relies on the unit root tests developed by Elliott, Rothenberg and Stock (1996) and Lopez (2006) to look for stationary or regime-wise stationary behavior, respectively. Furthermore, the final break selection uses Bai and Perron's (2003) method. The results show for all the countries considered that both rates are either stationary or regime-wise stationary with a same number of breaks and, mostly, corresponding dates. The results hold whether the rates are calculated annually or quarterly.

Number of Pages in PDF File: 18

Keywords: Interest rates, time breaks, consumption growth rates, unit root

JEL Classification: E2, E4, C22

working papers series


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Date posted: April 26, 2005 ; Last revised: July 7, 2008

Suggested Citation

Lopez, Claude and Reyes, Javier A., Real Interest Rate Stationarity and Per Capita Consumption Growth Rate (January 2007). University of Cincinnati, Economics Working Papers Series; Applied Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=706581 or http://dx.doi.org/10.2139/ssrn.706581

Contact Information

Claude Lopez (Contact Author)
Banque de France ( email )
Paris
France
HOME PAGE: http://claudelopez.com

Javier A. Reyes
University of Arkansas - Sam M. Walton College of Business ( email )
WCOB 328
University of Arkansas
Fayetteville, AR 72701
United States
479-575-6079 (Phone)
HOME PAGE: http://waltoncollege.uark.edu/directory.asp?id=reyes
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