Mean reversion of short-run interest rates: empirical evidence from new EU countries

Barros, Carlos P, Gil-Alana, Luis and Matousek, Roman (2012) Mean reversion of short-run interest rates: empirical evidence from new EU countries. The European Journal of Finance, 18 (2). pp. 89-107. ISSN 1351-847X

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Abstract

This article deals with the analysis of the mean reversion property of short-term interest rates in Central and Eastern European countries, using daily data from January 2000 to December 2008. For this purpose, we use long memory (fractionally integrated) models, and employ non-parametric, semi-parametric and parametric techniques to check if our results are robust across different methods. The results indicate that the mean reversion only takes place in the case of Hungary. For the remaining countries, the short-term interest rates are clearly non-stationary and non-mean reverting. Allowing for one break in the data, the break date takes place about 2001/2003 in all the series except in Lithuania, where the break occurs in 2007. In general, we observe an increase in the degree of dependence after the break in the majority of the series.

Item Type: Article
Keywords: interest rate; mean reversion; EU
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences > HG Finance > HG3810 Foreign exchange. International finance. International monetary system
Depositing User: Roman Matousek
Date Deposited: 20 Sep 2012 12:16
Last Modified: 20 Sep 2012 12:16
URI: http://sro.sussex.ac.uk/id/eprint/40745

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