Testing for Real Interest Rate Parity Using Panel Stationarity Tests with Dependence: A Note

15 Pages Posted: 17 Jan 2009

See all articles by Mariam Camarero

Mariam Camarero

Jaume I University - Department of Economics

Josep Lluís Carrion-i-Silvestre

University of Barcelona - Department of Econometrics

Cecilio R. Tamarit

University of Valencia - Department of Applied Economics

Abstract

In this paper we test for real interest parity (RIRP) among the 19 major OECD countries over the period 1978:Q1-2006:Q1 using both short- and long-run definitions of interest rates. Once the independence hypothesis is rejected among these series, we test for RIRP using panel data unit root and stationarity tests based on common factor models that allow for pervasive forms of dependence. Our results indicate that there is no evidence in favor of the weak version of the RIRP since one of the common factors that have been estimated is non-stationary.

Suggested Citation

Camarero Olivas, María Amparo (Mariam) and Carrion-i-Silvestre, Josep Lluís and Tamarit Escalona, Cecilio R., Testing for Real Interest Rate Parity Using Panel Stationarity Tests with Dependence: A Note. Manchester School, Vol. 77, Issue 1, pp. 112-126, January 2009. Available at SSRN: https://ssrn.com/abstract=1327446 or http://dx.doi.org/10.1111/j.1467-9957.2008.02090.x

María Amparo (Mariam) Camarero Olivas (Contact Author)

Jaume I University - Department of Economics ( email )

Campus del Riu Sec.
E-12071 Castellon
Spain

Josep Lluís Carrion-i-Silvestre

University of Barcelona - Department of Econometrics ( email )

Av. Diagonal 690
Barcelona, E-08034
Spain

Cecilio R. Tamarit Escalona

University of Valencia - Department of Applied Economics ( email )

4F04 Edificio Departamental Oriental
P.O. Box 22.006
Valencia, 33006
Spain
+34-963828349 (Phone)
+34-963828354 (Fax)

HOME PAGE: http://www.uv.ed/~tamac/

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