The Cointegration of International Interest Rates PDF Download

Author: Máiréad Devine
Publisher:
ISBN:
Category : Foreign exchange rates
Languages : en
Pages : 58

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Author: Ming-Shiun Pan
Publisher:
ISBN:
Category :
Languages : en
Pages :

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In this study, we re-examine the relationship among interest rates on the long-term government bonds of five industrialized countries. Using both the variance ratio test and fractional cointegration analysis, we find significant evidence that indicates the five government bond rates are fractionally cointegrated. In specific, our results show that the error correction term of the system of the five interest rates follows a mean-reverting, fractionally integrated process.

Author: Mr.Zhongxia Jin
Publisher: International Monetary Fund
ISBN: 1451848927
Category : Business & Economics
Languages : en
Pages : 29

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Book Description
Based on China's experience between 1980 and 2002, a cointegrated vector autoregression model was established to explore the relationships among real interest rates, real exchange rates and balance of payments in China. Taking into account institutional changes, the empirical study shows that significant and usually non-monotonic interactions exist between these three variables. The paper discusses theoretical and policy implications of the empirical result.

Author: Mehdi S. Monadjemi
Publisher:
ISBN:
Category : Interest rates
Languages : en
Pages : 36

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Author: John T. Barkoulas
Publisher:
ISBN:
Category :
Languages : en
Pages :

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DeGennaro, Kunkel, and Lee (1994) studied the long run dynamics of a system of long term interest rates of five industrialized countries by means of sophisticated cointegration methods. They found little evidence in support of the cointegration hypothesis, thus concluding that a separate set of fundamentals drives the dynamics of each of the individual long term interest rate series. In this study, we extend their analysis by exploring the possibility of very slow mean reverting dynamics (fractional cointegration) in the system of the five long term interest rates. We use the GPH test as our testing methodology for fractional integration and cointegration. Through rigorous investigation of the full system of the five long term interest rate series and its various subsystems, we provide evidence that the error correction term follows a fractionally integrated process with long memory, that is, it is mean reverting, though not covariance stationary. Despite significant persistence in the short run, a shock to the system of long term interest rates eventually dissipates so that an equilibrium relationship prevails in the long run.

Author: Mr.Ray Yeu-Tien Chou
Publisher: International Monetary Fund
ISBN: 1451950705
Category : Business & Economics
Languages : en
Pages : 16

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In this paper, we derive evidence on the integration of international stock markets from the cointegration properties of international stock market prices. Using the multivariate cointegration test of Johansen, we find that the set of six country stock price indices, including that of the United States, Canada, the United Kingdom, France, Germany, and Japan are cointegrated. The results suggest that there are long-run equilibrium relationships among the stock market prices. Subsample and subgroup analyses also indicate that the cointegration relationships have become stronger over time. This is consistent with greater stock market integration amid the increasing liberalization and globalization of capital markets.

Author: Pene Kalulumia
Publisher:
ISBN:
Category :
Languages : en
Pages : 22

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Author: James R Lothian
Publisher: World Scientific
ISBN: 9813148314
Category : Business & Economics
Languages : en
Pages : 820

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The aim of the book is to make the author's scholarly research in the areas of international finance and monetary economics easily accessible to other researchers and students. The articles included in the book span a wide range. The topics include the behavior of the three key relations in international finance, purchasing power parity, interest rate parity and real interest rate equality, the relation between money and other key economic variables, financial globalization and the transmission of economic disturbances internationally.

Author: Khalifa Ghali
Publisher:
ISBN:
Category :
Languages : en
Pages : 16

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This paper argues that conventional tests of financial market integration may be misleading because they neglect to consider two important issues: (i) testing the existence of transaction costs and (ii) testing the existence of structural change. While the existence of transaction costs may inhibit the one-to-one correspondence between changes in real interest rates in different countries, it could also be misleading to assume the existence of such costs while they do not. Therefore, this paper's proposition is to test for the existence of transaction costs to motivate the inclusion of an intercept term in a cointegration equation of real interest rates. It is shown that this is possible using the Johansen (1994) procedure to test for the inclusion of deterministic components in the cointegration space. It is also noted that the empirical literature has neglected the problem of stability of financial markets and, hence, its consequences on financial integration tests. To solve these two issues, this paper proposes a model of financial market integration that allows for the existence of transaction costs and for the possibility of structural change. This alternative model generates much stronger support for interest parity than is found in the existing literature.

Author: Mr.Jun Nagayasu
Publisher: International Monetary Fund
ISBN: 1451845553
Category : Business & Economics
Languages : en
Pages : 13

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This paper empirically examines the long-run relationship between real exchange rates and real interest rate differentials over the recent floating exchange rate period, using a panel cointegration method, with data for a set of industrialized countries. The paper finds evidence of statistically significant long-run relationships and plausible point estimates, which contrasts with much existing evidence. The failure of others to establish such relationships may reflect the estimation method they use rather than any inherent deficiency of the fundamentals-based models.