Abstract
Linear dynamic stochastic processes are derived for the ex-ente real interest differentials from those followed by the ex-post processes under the assumption of rational expectations. The technique is used to test the equality of ex-ante real rates between U.S. and a number of OECD countries. The evidence against the short-run equality of ex-ante real rates is overwhelming. In the long run the rates are co-integrated but not always equal. It takes approximately six months for the differentials to converge to their long-run values.
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