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

Alex Luiz Ferreira; Miguel A. León-Ledesma

Evidence is presented 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 Germany and 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. An important result is that this adjustment tends to be highly asymmetric and markedly different for developed and emerging countries. Our evidence reveals a high degree of market integration for developed countries and highlights the importance of risk premia for emerging markets. -- Real Interest Rate Differentials ; Market Integration ; Unit Roots ; Asymmetric adjustment

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Year of publication:	Aug. 2003 ; [Elektronische Ressource]
Other Persons:	Ferreira, Alex Luiz (contributor) ; León-Ledesma, Miguel A. (contributor)
Institutions:	University of Kent / Department of Economics (contributor)
Publisher:	Canterbury : Univ. of Kent, Dep. of Economics
Subject:	Zinsparität \| Interest rate parity \| Realzins \| Real interest rate \| Marktintegration \| Market integration \| Einheitswurzeltest \| Unit root test \| Vergleich \| Comparison \| Industrieländer \| Industrialized countries \| Schwellenländer \| Emerging economies \| 1995-2002