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Real Interest Rate Linkages in the Pacific Basin Region

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  • Philip Inyeob Ji
  • Jae H. Kim

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Abstract

This paper examines the linkage of real interest rates of a group of Pacific-Basin countries with a focus on East Asia. We consider monthly real interest rates of the US, Japan, Korea, Singapore, and Thailand from 1980 and 2004. The impulse response analysis and half-life estimation are conducted in a multivariate setting, adopting the bias-corrected bootstrap as a means of statistical inference. It is found that the degree of capital market integration has increased after the Asian financial crisis in 1997. The evidence suggests that the crisis has substantially changed the nature of the short run interactions among the real interest rates. Before the crisis, both the US and Japanese capital markets dominated the region. However, after the crisis, the dominance of the Japanese market has completely disappeared, while the US remains as a sole dominant player.

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File URL: http://www.buseco.monash.edu.au/ebs/pubs/wpapers/2005/wp23-05.pdf
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Bibliographic Info

Paper provided by Monash University, Department of Econometrics and Business Statistics in its series Monash Econometrics and Business Statistics Working Papers with number 23/05.

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Length: 31 pages
Date of creation: Oct 2005
Date of revision:
Handle: RePEc:msh:ebswps:2005-23

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Keywords: Financial crisis; Bias-correction; Bootstrapping; Capital market Integration; Half-life; Impulse response analysis; Vector autoregression.;

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Cited by:
  1. Kisswani, Khalid/ M. & Nusair, Salah/ A., 2011. "Non-linear convergence in Asian interest rates and inflation rates," MPRA Paper 34179, University Library of Munich, Germany.
  2. Baharumshah, Ahmad Zubaidi & Soon, Siew-Voon & Hamzah, Nor Aishah, 2013. "Parity reversion in real interest rate in the Asian countries: Further evidence based on local-persistent model," Economic Modelling, Elsevier, vol. 35(C), pages 634-642.

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