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Common Trends and Common Cycles among Interest Rates of the G7-Countries

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Author Info
Nannette Lindenberg ()
Frank Westermann ()

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Abstract

In this paper we re-investigate the comovements of interest rates in the G7-countries. We propose a structured modus operandi to analyze the time series characteristics of interest rates and to test for common features. We conduct cointegration, serial correlation common feature and codependence tests with nominal and real interest rates using quarterly data from 1975 to 2007. Overall we only find little evidence of comovements. Common trends are occasionally observed, but the majority of interest rates are not cointegrated. Although some evidence for codependence of higher order is found among European countries, common cycles appear to exist only in rare cases and cannot be generalized for all interest rates.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2532.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2532

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Related research
Keywords: interest rates; comovement; cointegration; serial correlation common feature; codependence;

Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing

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    Other versions:
  3. Bremnes, Helge & Gjerde, Oystein & Soettem, Frode, 2001. " Linkages among Interest Rates in the United States, Germany and Norway," Scandinavian Journal of Economics, Blackwell Publishing, vol. 103(1), pages 127-45, March. [Downloadable!] (restricted)
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    Other versions:
  5. Yin-wong Cheung & Dickson Tam & Matthew S. Yiu, 2006. "Does the Chinese Interest Rate Follow the US Interest Rate?," Working Papers 192006, Hong Kong Institute for Monetary Research. [Downloadable!]
    Other versions:
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  14. Cheung, Yin-Wong & Westermann, Frank, 2002. "Output Dynamics of the G7 Countries--Stochastic Trends and Cyclical Movements," Applied Economics, Taylor and Francis Journals, vol. 34(18), pages 2239-47, December. [Downloadable!] (restricted)
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  15. Karanasos, M. & Sekioua, S.H. & Zeng, N., 2006. "On the order of integration of monthly US ex-ante and ex-post real interest rates: New evidence from over a century of data," Economics Letters, Elsevier, vol. 90(2), pages 163-169, February. [Downloadable!] (restricted)
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