Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/71917
Authors: 
Brzoza-Brzezina, Michal
Crespo Cuaresma, Jesus
Year of Publication: 
2007
Series/Report no.: 
Working Papers in Economics and Statistics 2007-06
Abstract: 
We use a Bayesian dynamic latent factor model to extract world, regional and country factors of real interest rate series for 22 OECD economies. We find that the world factor plays a privileged role in explaining the variance of real rates for most countries in the sample, and accounts for the steady decrease in interest rates in the last decades. Moreover, the relative contribution of the world factor is rising over time. We also find relevant differences between the group of countries that follow fixed exchange rate strategies and those with flexible regimes.
Subjects: 
real interest rates
natural rate of interest
Bayesian dynamic factor models
JEL: 
E43
C11
E58
Document Type: 
Working Paper

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