Corrigendum to "Regime Changes in International Real Interest Rates: Are They a Monetary Phenomenon?"
Yoon, Gawon, Journal of Money, Credit & Banking
I PROVIDE CORRECTIONS to some of the previous empirical findings published in Journal of Money, Credit and Banking, Vol. 37, No. 5 (October 2005) by Rapach and Wohar on multiple structural breaks in mean real interest rates and inflation rates from 13 industrialized countries. I employ the same Bai and Perron (1998, 2003, 2006) method as Rapach and Wohar do. I utilize, however, a newly available "correct" procedure, which corrects numerical problems that contaminated its earlier versions. The problems were first identified by Zeileis and Kleiber (2005a, 2005b) and can sometimes produce erroneous results.
Even after our corrections are made, the estimation results do not change much for most countries. There are, however, some notable differences. For instance, for the real interest rate from Australia, Table 1 compares the results.
In each cell, the estimated mean of the real interest rate in each regime is reported, along with the estimated break date. The number in parentheses is a standard error and the numbers in square brackets are the 95% confidence interval of the break date. The sample period is 1960:4:1998:3, with 152 quarterly observations. In Rapach and Wohar (2005), the upper limit of the confidence interval associated with the first break was erroneously reported as 1975:1.
More detailed empirical results and replication files can be found at the data archive of the Journal of Money, Credit and Banking.
Received November 19, 2007; and accepted in revised form November 13, 2008.
Bai, Jushan, and Pierre Perron. (1998). "Estimating and Testing Linear Models with Multiple Structural Changes." Econometrica, 66, 47-78.
Bai, Jushan, and Pierre Perron. …