Template-Type: ReDIF-Paper 1.0
Author-Name: Juan Carlos Cuestas
Author-Name: Barry Harrison
Title: Further evidence on the Real Interest Rate Parity hypothesis in Central and Eastern European Countries: unit roots and nonlinearities
Abstract: This paper analyses the empirical fulfilment of the Real Interest Rate Parity (RIRP) theory for a pool of Central and Eastern European Countries. To do so, we apply the recently developed Ng and Perron (2001) unit root tests, that are corrected versions of existing unit root tests and the Kapetanios et al. (2003) unit root test which generalises the alternative hypothesis to the globally stationary smooth transition autoregression model. Our results point to the existence of evidence in favour of the empirical fulfilment of the RIRP, in particular, when taking into account the possibility of nonlinearities in the real interest rate differential.
File-URL: http://www.ntu.ac.uk/__data/assets/pdf_file/0014/311603/further-evidence-real-interest-rate-parity-hypothesis.pdf
File-Format: Application/pdf
File-Function: First version, 2009
Creation-Date: 2009-01
Classification-JEL: C32, F15
Keywords: Real Interest Rate parity, Unit Roots, nonlinearities, Central and East Europe.
Handle: RePEc:nbs:wpaper:2009/1