A Brief Survey of Stochastic Properties of Real Interest Rates

Real interest rate is one of the most important economic variables. This variable plays a central role in decision-making process of households, firms and government, and main policy tool of many central banks. Stochastic properties of real interest rate is basic ingredient of several econometric models and has some important implications on basic assumptions of many important financial and macroeconomic models such as Consumption Based Asset Pricing Model, Fisher Hypothesis and some growth models. Because of its vital importance for the economy and economic-financial theories, time series properties of real interest rate have been investigated intensely. However, studies those investigate stochastic properties of real interest rates of developing countries is comparatively limited.