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- Title
Do real interest rates converge across Latin american countries?
- Authors
Zhang, Wen; Chang, Hsu-Ling; Su, Chi-Wei
- Abstract
In this study, we apply the Sequential Panel Selection Method (SPSM), proposed by , to investigate and assess the non-stationary properties of the real interest rate parity (RIRP) for fourteen Latin American countries. Utilizing the SPSM, we can classify the entire panel into a group of stationary series and a group of non-stationary series. We clearly identify how many and which series in the panel are stationary processes and provide robust evidence that clearly indicate RIRP holds true for ten countries. Our findings note that these countries' real interest rate convergence is a mean reversion toward RIRP equilibrium values in a non-linear way. Our results have important policy implications for these Latin American countries under study.
- Subjects
LATIN America; ECONOMIC equilibrium; INTEREST rates; FOURIER transforms; STATIONARY processes
- Publication
Portuguese Economic Journal, 2014, Vol 13, Issue 2, p117
- ISSN
1617-982X
- Publication type
Article
- DOI
10.1007/s10258-014-0101-y