Time series behaviour of the real interest rates in transition economies

Guney P., Telatar E., Hasanov M.

ECONOMIC RESEARCH-EKONOMSKA ISTRAZIVANJA, vol.28, no.1, pp.104-118, 2015 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 28 Issue: 1
  • Publication Date: 2015
  • Doi Number: 10.1080/1331677x.2015.1028240
  • Journal Name: ECONOMIC RESEARCH-EKONOMSKA ISTRAZIVANJA
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.104-118
  • Keywords: real interest rate, transition economies, structural break, nonlinearity, unit root, RATE PARITY HYPOTHESIS, OIL-PRICE SHOCK, PANEL KSS TEST, UNIT-ROOT, MEAN REVERSION, TERM STRUCTURE, ASYMMETRIC ADJUSTMENT, FISHER HYPOTHESIS, MONETARY-POLICY, GREAT CRASH
  • Hacettepe University Affiliated: Yes

Abstract

Stationarity properties of real interest rates are examined for 21 transition economies. Owing to transaction costs and other frictions, it is quite plausible that we are dealing with potential non-linearities in the real interest rate. Therefore we examine stationarity of the real interest rate allowing for non-linearities and asymmetric adjustment with smooth structural change in the data generating process. Our findings suggest that taking account of non-linearities in the data generating process results in a rejection of the unit root null hypothesis for some countries which seem to be non-stationary according to conventional unit root tests. This finding points to the importance of allowing for both structural breaks and asymmetric adjustment in the real interest rate series of transition countries.