NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Fin de Siecle Real Interest Parity

Eiji Fujii, Menzie D. Chinn

NBER Working Paper No. 7880
Issued in September 2000
NBER Program(s):   IFM

We evaluate the recent evidence for real interest parity, focusing on long-term yields. Examining the data on financial instruments of various maturities across the G7 countries, we find substantial differences in the degree of real interest equalization measured at different horizons. In general, real interest parity holds better at long horizons than at short. This empirical result is robust to alternative ways of modeling expected inflation rates. Considering the relevance of long-term yields for the investment decisions of firms, our findings imply that the degree of capital mobility among the G-7 economies may be greater than previously thought.

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Document Object Identifier (DOI): 10.3386/w7880

Published: Fujii, Eiji and Menzie Chinn. "Fin De Siecle Real Interest Parity," Journal of International Financial Markets, Institutions and Money, 2001, v11(3-4,Sep), 289-308.

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