SOME EVIDENCE ON MEAN REVERSION IN EX ANTE REAL INTEREST-RATES

Ex ante real interest rates and their differentials are rested for mea n reversion using quarterly data on three-month treasury bill rates an d consumer prices for 12 major industrial countries over the period 19 72:1-1993:3. The results are strongly supportive of mean reversion, pa rticularly when less conventional rests are employed. The conclusion t hat can be derived from the empirical evidence is that goods, capital and foreign exchange markets have become highly integrated in the coun tries under consideration.