On mean reversion in real interest rates: An application of threshold cointegration

Arbeitspapier

Using data from Germany, Japan, UK, and the U.S., we explore possible threshold cointegration in nominal short- and long-run interest rates with corresponding inflation rates. Traditional cointegration implies perfect mean reversion in real rates and hence confirms the Fisher hypothesis. Threshold cointegration accounts for the possibility that this mean reversion is active only conditional on certain threshold values in the observed variables. We investigate whether findings of such effects can be exploited for interest rate prediction.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Reihe Ökonomie / Economics Series ; No. 109

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models ; Forecasting Models; Simulation Methods ; Interest Rates: Determination, Term Structure, and Effects
• Subject: nonlinear time series ; Fisher equation ; yield spread ; forecasting ; Realzins ; Quantitätstheorie ; Zeitreihenanalyse ; Kointegration ; Schätzung ; Deutschland ; Japan ; Großbritannien ; USA ; Mean Reversion ; Autokorrelation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Jumah, Adusei ; Kunst, Robert M.
• Event: Veröffentlichung
• (who): Institute for Advanced Studies (IHS)
• (where): Vienna
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/71237
• Last update: 10.03.2025, 11:45 AM CET