SOME EVIDENCE ON MEAN REVERSION IN EX ANTE REAL INTEREST RATES

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Astract

Ex ante real interest rates and their differentials are tested for mean reversion using quarterly data on three-month treasury bill rates and consumer prices for 12 major industrial countries over the period 1972:l-1993:3. The results are strongly supportive of mean reversion, particularly when less conventional tests are employed. The conclusion that can be derived from the empirical evidence is that goods, capital and foreign exchange markets have become highly integrated in the countries under consideration.

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