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Linkages among Interest Rates in the United States, Germany and Norway

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  • Bremnes, Helge
  • Gjerde, Oystein
  • Soettem, Frode

Abstract

The Johansen multivariate cointegration methodology is used to analyze relationships among short-term and long-term interest rates in the United States, Germany and Norway. A variance decomposition approach is applied to estimate the proportion of each interest rate's forecast error variance attributable to innovations in the other interest rates. Impulse response functions are plotted to illustrate the speed with which interest rate events are transmitted between capital markets. The analyses illustrate that US interest rates have a significant influence on both German and Norwegian interest rates, while the reverse effect is modest. Norway is also strongly exposed to German interest rate movements, which reflects the consequences of a small country linking its currency to the value of European currencies. Copyright 2001 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Bremnes, Helge & Gjerde, Oystein & Soettem, Frode, 2001. " Linkages among Interest Rates in the United States, Germany and Norway," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(1), pages 127-145, March.
  • Handle: RePEc:bla:scandj:v:103:y:2001:i:1:p:127-45
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    References listed on IDEAS

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    Cited by:

    1. Erik Hjalmarsson & Pär Österholm, 2010. "Testing for cointegration using the Johansen methodology when variables are near-integrated: size distortions and partial remedies," Empirical Economics, Springer, vol. 39(1), pages 51-76, August.
    2. Bhatti, Razzaque H., 2014. "The existence of uncovered interest parity in the CIS countries," Economic Modelling, Elsevier, vol. 40(C), pages 227-241.
    3. Nieh, Chien-Chung & Yau, Hwey-Yun, 2004. "Time series analysis for the interest rates relationships among China, Hong Kong, and Taiwan money markets," Journal of Asian Economics, Elsevier, vol. 15(1), pages 171-188, February.
    4. Till Strohsal & Enzo Weber, 2014. "Mean-variance cointegration and the expectations hypothesis," Quantitative Finance, Taylor & Francis Journals, vol. 14(11), pages 1983-1997, November.
    5. Lindenberg, Nannette & Westermann, Frank, 2012. "Common trends and common cycles among interest rates of the G7-countries," Journal of Macroeconomics, Elsevier, vol. 34(4), pages 1125-1140.
    6. repec:dug:actaec:y:2017:i:2:p:139-156 is not listed on IDEAS
    7. Beechey, Meredith & Hjalmarsson, Erik & sterholm, Pr, 2009. "Testing the expectations hypothesis when interest rates are near integrated," Journal of Banking & Finance, Elsevier, vol. 33(5), pages 934-943, May.
    8. Tamim Bayoumi & Andrew Swiston, 2010. "The Ties that Bind: Measuring International Bond Spillovers Using Inflation-Indexed Bond Yields," IMF Staff Papers, Palgrave Macmillan, vol. 57(2), pages 366-406, June.
    9. Vuyyuri, S., 2004. "Linkages of Indian Interest Rates with US and Japanese Rates," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 4(2).

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