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Article
Political Regime Change and the Real Interest Rate
Journal of Money, Credit and Banking
  • Tony Caporale, University of Dayton
  • Kevin B. Grier, Centro de Investigación y Docencia Económicas
Document Type
Article
Publication Date
8-1-2000
Abstract
The effect of policy regime changes on real interest rates has important implications for financial and economic theory. However, there is little current evidence that such changes have any impact on the level of real interest rates. In this paper, we estimate both the number and location of structural breaks in the three-month U.S. real interest rate using a global optimization technique developed by Bai and Perron (1998). We compare the timing of large political changes to the dating of these structural breaks. We find that changes in party control of either a branch of Congress or the presidency are largely consistent with the timing of real rate shifts, while changes in the Federal Reserve chair are generally inconsistent with real rate regime shifts.
Inclusive pages
Journal of Money, Credit and Banking
ISBN/ISSN
320-334
Comments

Permission documentation is on file.

Publisher
Ohio State University Press
Peer Reviewed
Yes
Citation Information
Tony Caporale and Kevin B. Grier. "Political Regime Change and the Real Interest Rate" Journal of Money, Credit and Banking Vol. 32 Iss. 3 (2000)
Available at: http://works.bepress.com/tony_caporale/45/