Asymmetric Dynamics in UK Real Interest Rates

Posted: 18 Jun 2003

See all articles by Ana-Maria Fuertes

Ana-Maria Fuertes

Cass Business School, City University of London

Jerry Coakley

University of Essex - Essex Business School

Abstract

This paper explores the long run behaviour and short run dynamics of quarterly UK real interest rates, 1950-1999, in a threshold autoregressive framework. Using bootstrap LR extensions of the Enders and Granger (1998) threshold unit root and asymmetry tests, it finds support for sign and amplitude asymmetric mean reversion. These findings provide one explanation for the apparent persistence in real interest rates and are consistent with asymmetric feedback rules for inflation targeting.

Keywords: Fisher effect, inflation targeting, persistence, threshold autoregression

JEL Classification: C22, F3

Suggested Citation

Fuertes, Ana-Maria and Coakley, Jerry, Asymmetric Dynamics in UK Real Interest Rates. Applied Financial Economics, Vol. 12, pp. 379-387, June 2002; Cass Business School Research Paper. Available at SSRN: https://ssrn.com/abstract=396541

Ana-Maria Fuertes

Cass Business School, City University of London ( email )

Faculty of Finance
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 207 477 0186 (Phone)
+44 207 477 8881 (Fax)

HOME PAGE: http://www.city.ac.uk/people/academics/ana-maria-fuertes

Jerry Coakley (Contact Author)

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom
+44 1206 872455 (Phone)
+44 1206 873429 (Fax)

HOME PAGE: http://www.essex.ac.uk/afm/staff/coakley.shtm

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