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Article: Mean reversion in interest rates: new evidence from a panel of OECD countries.(Organization for Economic Cooperation and Development)
- Article from:
- Journal of Money, Credit & Banking
- Article date:
- November 1, 1996
- Author:
CopyrightCOPYRIGHT 1996 Ohio State University Press. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Over the past decade, economists have shown considerable interest in the time series properties of interest rates, with particular attention being paid to the issue of whether interest rates can be characterized as unit root or mean-reverting processes. If interest rates contain unit roots, then a one-time shock to interest rates is permanent and its effects cannot be eliminated as time elapses. On the other hand, if interest rates can be characterized as stationary processes, then innovations are transitory and are expected to be reversed. The stationarity properties not only are essential in developing an understanding of the nature of shocks to interest rates, but ...