Deakin University
Browse

File(s) under permanent embargo

Real interest rates, inflation and the open economy : a regime-switching perspective on Australia and New Zealand

journal contribution
posted on 2009-03-01, 00:00 authored by M Holmes, Richard Dutu, X Cui
We investigate the time-series properties of Australian and New Zealand real interest rates within a Markov-switching framework. This enables us to identify characteristics in real interest rate behavior hitherto unacknowledged. We find that rates switch between alternative stationary regimes characterized by differing means, speeds of mean-reversion and volatility. For New Zealand, high rates of inflation increase the probability of remaining in a regime characterized by a faster speed of adjustment. Further application of this methodology considers the real interest rate differential between Australia and New Zealand and points to differing regimes based on volatility rather than persistence.

History

Journal

International review of economics & finance

Volume

18

Issue

2

Pagination

351 - 360

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

1059-0560

eISSN

1873-8036

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal

Copyright notice

2008, Elsevier Inc.

Usage metrics

    Research Publications

    Categories

    No categories selected

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC