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International financial market integration and linkages of national interest rates

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Author Info
Adrian W. Throop
Abstract

This article finds that even in the 1980's, when barriers to international capital mobility had been largely eliminated, there was no measurable tendency for real interest rates between the U.S. and the major industrial countries to converge. Moreover, the estimated short-run responses of both short-term and long-term interest rates to one another have been exceedingly weak. As a consequence, it appears that U.S. and foreign central banks have been able to influence their domestic interest rates quite independently from the influence of interest rates abroad, despite a high degree of international capital mobility.

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Article provided by Federal Reserve Bank of San Francisco in its journal Economic Review.

Volume (Year): (1994)
Issue (Month): ()
Pages: 3-18
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Handle: RePEc:fip:fedfer:y:1994:p:3-18:n:3

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Related research
Keywords: Interest rates ; Foreign exchange rates ; Capital movements;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  2. David A. Hsieh, 1982. "Tests of Rational Expectations and No Risk Premium in Forward Exchange Markats," NBER Working Papers 0843, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Adrian W. Throop, 1993. "A generalized uncovered interest parity model of exchange rates," Economic Review, Federal Reserve Bank of San Francisco, pages 3-16. [Downloadable!]
  4. Engel, Charles & Rodrigues, Anthony P, 1989. "Tests of International CAPM with Time-Varying Covariances," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(2), pages 119-38, April-Jun. [Downloadable!] (restricted)
    Other versions:
  5. Engle, Robert F. & Yoo, Byung Sam, 1987. "Forecasting and testing in co-integrated systems," Journal of Econometrics, Elsevier, vol. 35(1), pages 143-159, May. [Downloadable!] (restricted)
  6. Robert E. Cumby & Maurice Obstfeld, 1985. "International Interest-Rate and Price-Level Linkages Under Flexible Exchalge Rates: A Review of Recent Evidence," NBER Working Papers 0921, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Modjtahedi, Bagher, 1988. "Dynamics of real interest differentials : An empirical investigation," European Economic Review, Elsevier, vol. 32(6), pages 1191-1211, July. [Downloadable!] (restricted)
  8. Helen Popper, 1990. "International capital mobility: direct evidence from long-term currency swaps," International Finance Discussion Papers 386, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  9. Frederic S. Mishkin, 1985. "Are Real Interest Rates Equal Across Countries? An Empirical Investigation of International Parity Conditions," NBER Working Papers 1048, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ivan Paya & Agustín Duarte & Ioannis A. Venetis, 2005. "The Long Memory Story Of Real Interest Rates. Can It Be Supported?," Working Papers. Serie AD 2005-01, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
    Other versions:
  2. Nikiforos Laopodis, 2001. "International Interest-Rate Transmission and the “German Dominance Hypothesis†Within EMS," Open Economies Review, Springer, vol. 12(4), pages 347-377, October. [Downloadable!] (restricted)
  3. J.M. Berk & K.H.W. Knot, 1999. "Co-Movements in Long-Term Interest Rates and the Role of PPP-BasedExchange Rate Expectations," DNB Staff Reports (discontinued) 37, Netherlands Central Bank. [Downloadable!]
    Other versions:
  4. Angelos Kanas & Georgios Tsiotas, 2005. "Real interest rates linkages between the USA and the UK in the postwar period," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 10(3), pages 251-262. [Downloadable!]
  5. Antoine Bouveret & Bruno Ducoudré, 2007. "On the contingency of equilibrium exchange rates with time- consistent economic policies," Documents de Travail de l'OFCE 2007-08, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
  6. Denise Côté & Christopher Graham, 2004. "Convergence of Government Bond Yields in the Euro Zone: The Role of Policy Harmonization," Working Papers 04-23, Bank of Canada. [Downloadable!]
  7. Heejoon Kang, 1999. "The Applied Cointegration Analysis for the Open Economy: A Critical Review," Open Economies Review, Springer, vol. 10(3), pages 325-346, July. [Downloadable!] (restricted)
  8. Ioannis A. Venetis & Agustin Duarte & Ivan Paya, 2004. "The long memory story of ex post real interest rates. Can it be supported?," Econometrics 0404004, EconWPA. [Downloadable!]
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