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Does the real interest parity hypothesis hold? Evidence for developed and emerging markets

Ferreira, Alex Luiz, Leon-Ledesma, Miguel A. (2007) Does the real interest parity hypothesis hold? Evidence for developed and emerging markets. Journal of International Money and Finance, 26 (3). pp. 364-382. ISSN 0261-5606. (doi:10.1016/j.jimonfin.2006.11.003) (The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided) (KAR id:2779)

The full text of this publication is not currently available from this repository. You may be able to access a copy if URLs are provided.
Official URL:
http://dx.doi.org/10.1016/j.jimonfin.2006.11.003

Abstract

We present empirical evidence on the real interest parity hypothesis for a set of emerging and developed countries. This is done by carrying out a set of unit-root tests on the real interest differentials with respect to the US. Our results support the hypothesis of a rapid reversion towards a zero differential for developed countries and towards a positive one for emerging markets. Mean reversion is faster for emerging market economies. We also find that this adjustment tends to be highly asymmetric and markedly different for developed and emerging markets. Our evidence reveals a high degree of market integration for developed countries and highlights the importance of risk premia for emerging markets.

Item Type: Article
DOI/Identification number: 10.1016/j.jimonfin.2006.11.003
Uncontrolled keywords: real interest rate differentials; market integration; unit roots; asymmetric adjustment
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Depositing User: Louise Dorman
Date Deposited: 24 Apr 2008 08:51 UTC
Last Modified: 16 Nov 2021 09:41 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/2779 (The current URI for this page, for reference purposes)

University of Kent Author Information

Ferreira, Alex Luiz.

Creator's ORCID:
CReDIT Contributor Roles:

Leon-Ledesma, Miguel A..

Creator's ORCID: https://orcid.org/0000-0002-3558-2990
CReDIT Contributor Roles:
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