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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Fin de Siecle Real Interest Parity
2000, National Bureau of Economic Research
electronic resource
in English
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September 2000.
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