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Examining real interest parity: which component reverts quickest and in which regime?

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journal contribution
posted on 06.03.2015, 15:08 by Kavita SirichandKavita Sirichand, Andrew VivianAndrew Vivian, Mark Wohar
This article re-examines real interest parity (RIP), focusing upon which component of real interest parity drives convergence to parity. We find that it is the reversion of inflation rather than nominal interest rates which is the primary source of convergence to RIP. Nominal interest rate differentials are found to be persistent during both periods. Furthermore, we additionally find that mean reversion in the inflation differentials is faster during the Gold Standard period.

History

School

  • Business and Economics

Department

  • Business

Published in

International Review of Financial Analysis

Volume

In

Issue

Press

Pages

i - xxxv

Citation

SIRICHAND, K., VIVIAN, A. and WOHAR, M.E., 2015. Examining real interest parity: which component reverts quickest and in which regime?. International Review of Financial Analysis, 39, pp.72-83.

Publisher

© Elsevier

Version

AM (Accepted Manuscript)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

Publication date

2015

Notes

This paper was accepted for publication in the journal International Review of Financial Analysis and the definitive published version is available at http://dx.doi.org/10.1016/j.irfa.2015.01.007

ISSN

1057-5219

Language

en