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Eurocurrency interest rate linkages: A frequency domain analysis

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  • Ciner, Cetin
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    Abstract

    We investigate relations between Eurocurrency interest rates using frequency domain methods, which permit us to decompose test statistics into short-term and long-term causality measures. We document significant linkages between international interest rates. Specifically, we show that the euro plays an increasingly important role in global money markets. In fact, a subperiod analysis suggests that the euro interest rate leads the US dollar rate during the recent financial crisis. We discuss the implications of the findings for understanding global monetary policy dynamics as well as modeling and forecasting of short-term interest rates.

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    File URL: http://www.sciencedirect.com/science/article/pii/S1059056010000948
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    Bibliographic Info

    Article provided by Elsevier in its journal International Review of Economics & Finance.

    Volume (Year): 20 (2011)
    Issue (Month): 4 (October)
    Pages: 498-505

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    Handle: RePEc:eee:reveco:v:20:y:2011:i:4:p:498-505

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    Web page: http://www.elsevier.com/locate/inca/620165

    Related research

    Keywords: Eurocurrency rate Frequency domain Causality Financial crisis;

    References

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    11. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
    12. Bodart,Vincent & Candelon,Bertrand, 2005. "Evidences of Interdependence and Contagion using a Frequency Domain Framework," Research Memorandum 024, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    13. Alvaro Angeriz & Philip Arestis, 2007. "Monetary policy in the UK," Cambridge Journal of Economics, Oxford University Press, vol. 31(6), pages 863-884, November.
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    15. Breitung, Jorg & Candelon, Bertrand, 2006. "Testing for short- and long-run causality: A frequency-domain approach," Journal of Econometrics, Elsevier, vol. 132(2), pages 363-378, June.
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    Cited by:
    1. Wei Yanfeng, 2013. "The Dynamic Relationships between Oil Prices and the Japanese Economy: A Frequency Domain Analysis," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 57-67, May.

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