The Persistence in International Real Interest Rates [International Journal of Finance and Economics, forthcoming]

In this paper, we investigate the degree of persistence in quarterly postwar tax-adjusted ex post real interest rates for 13 industrialized countries using two recently developed econometric procedures. Our results show that international tax-adjusted real interest rates are typically very persistent, with the lower bound of the 95 % confidence interval for the sum of the autoregressive coefficients very close to 0.90 for nearly every country. A highly persistent real interest rate has important theoretical implications