Common trends and common cycles among interest rates of the G7-countries
Both, from a macroeconomic modeling perspective, as well as for a policy point of view, there has recently been a renewed interest in the cyclical and long-run comovement of interest rates. In this paper we re-investigate the long- and short-run comovements in the G7-countries by conducting tests for cointegration, common serial correlation and codependence with nominal and real interest rates, using quarterly data from 1975 to 2010. Overall, we find only 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 in the pre-Euro area sample, common cycles appear to exist only in rare cases. We argue that some earlier, more positive findings are difficult to reconcile due to differing assumptions about the underlying stochastic properties of interest rates. We conclude that they cannot be generalized for all interest rates, time periods, and reasonable alternative estimation procedures.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 34 (2012)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/inca/622617|
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.:
- Rose, Andrew Kenan, 1988. " Is the Real Interest Rate Stable?," Journal of Finance, American Finance Association, vol. 43(5), pages 1095-1112, December.
- Engle, Robert F & Kozicki, Sharon, 1993.
"Testing for Common Features,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 11(4), pages 369-80, October.
- 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 127-45, March.
- Espen Henriksen & Finn E. Kydland & Roman Sustek, .
"The High Cross-Country Correlations of Prices and Interest Rates,"
11/01, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
- Roman Sustek & Finn Kydland & Espen Henriksen, 2008. "The High Correlations of Prices and Interest Rates across Nations," 2008 Meeting Papers 773, Society for Economic Dynamics.
- Henriksen, Espen & Kydland, Finn & Sustek, Roman, 2008. "The High Cross-Country Correlations of Prices and Interest Rates," MPRA Paper 10963, University Library of Munich, Germany.
- Yin-Wong Cheung & Dickson C. Tam & Matthew S. Yiu, 2008.
"Does the Chinese interest rate follow the US interest rate?,"
International Journal of Finance & Economics,
John Wiley & Sons, Ltd., vol. 13(1), pages 53-67.
- Yin-Wong Cheung & Dickson Tam & Matthew S. Yiu, 2007. "Does the Chinese Interest Rate Follow the US Interest Rate?," CESifo Working Paper Series 1943, CESifo Group Munich.
- 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.
- Cubadda, Gianluca, 1999. "Common Cycles in Seasonal Non-stationary Time Series," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(3), pages 273-91, May-June.
- James G. MacKinnon, 1995.
"Numerical Distribution Functions for Unit Root and Cointegration Tests,"
918, Queen's University, Department of Economics.
- MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
- Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 393-95, October.
- Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1987.
"Stochastic Trends and Economic Fluctuations,"
NBER Working Papers
2229, National Bureau of Economic Research, Inc.
- Cubadda, Gianluca, 2007.
"A unifying framework for analysing common cyclical features in cointegrated time series,"
Computational Statistics & Data Analysis,
Elsevier, vol. 52(2), pages 896-906, October.
- Gianluca Cubadda, 2007. "A Unifying Framework for Analysing Common Cyclical Features in Cointegrated Time Series," CEIS Research Paper 102, Tor Vergata University, CEIS.
- Wu, Yangru & Zhang, Hua, 1996. "Mean Reversion in Interest Rates: New Evidence from a Panel of OECD Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 604-21, November.
- Jakob de Haan & Tigran Poghosyan, 2007. "Interest Rate Linkages in EMU Countries: A Rolling Threshold Vector Error-Correction Approach," CESifo Working Paper Series 2060, CESifo Group Munich.
- Cheung, Yin-Wong & Lai, Kon S, 1995. "Lag Order and Critical Values of the Augmented Dickey-Fuller Test," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 277-80, July.
- 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,"
Elsevier, vol. 90(2), pages 163-169, February.
- Menelaos Karananos & S.H Sekioua & N Zeng, 2005. "On the order of integration of monthly US ex-ante and ex-post real interest rates new evidence from over a century of data," Money Macro and Finance (MMF) Research Group Conference 2005 21, Money Macro and Finance Research Group.
- Choi, In & Chul Ahn, Byung, 1998. "Testing the null of stationarity for multiple time series," Journal of Econometrics, Elsevier, vol. 88(1), pages 41-77, November.
- Yin-Wong Cheung & Frank Westermann, 2003.
"Sectoral trends and cycles in Germany,"
Springer, vol. 28(1), pages 141-156, January.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- Gourieroux, Christian & Peaucelle, Irina, 1989. "Detecting a long run relationship (with an application to the p.p.p. hypothesis)," CEPREMAP Working Papers (Couverture Orange) 8902, CEPREMAP.
- Yin-Wong Cheung & Frank Westermann, 2002.
"Output dynamics of the G7 countries--stochastic trends and cyclical movements,"
Taylor & Francis Journals, vol. 34(18), pages 2239-2247.
- Yin-Wong Cheung & Frank Westermann, 1999. "Output Dynamics of the G7 Countries - Stochastic Trends and Cyclical Movements," CESifo Working Paper Series 220, CESifo Group Munich.
- Peter KUGLER & Klaus NEUSSER, 1990.
"International Real Interest Rate Equalization: A Multivariate Time Series Approach,"
Vienna Economics Papers
vie9003, University of Vienna, Department of Economics.
- Kugler, Peter & Neusser, K, 1993. "International Real Interest Rate Equalization: A Multivariate Time-Series Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(2), pages 163-74, April-Jun.
- Viktoria Hnatkovska & Amartya Lahiri & Carlos A. Vegh, 2008.
"Interest Rates and the Exchange Rate: A Non-Monotonic Tale,"
NBER Working Papers
13925, National Bureau of Economic Research, Inc.
- Hnatkovska, Viktoria & Lahiri, Amartya & Vegh, Carlos A., 2013. "Interest rate and the exchange rate: A non-monotonic tale," European Economic Review, Elsevier, vol. 63(C), pages 68-93.
- Christoph Schleicher, 2007.
"Codependence in cointegrated autoregressive models,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 22(1), pages 137-159.
- Christoph Schleicher, 2004. "Codependence in Cointegrated Autoregressive Models," Computing in Economics and Finance 2004 286, Society for Computational Economics.
- Vahid, Farshid & Engle, Robert F., 1997. "Codependent cycles," Journal of Econometrics, Elsevier, vol. 80(2), pages 199-221, October.
- Diego Romero-Ávila, 2007. "Unit roots and persistence in the nominal interest rate: a confirmatory analysis applied to the OECD," Canadian Journal of Economics, Canadian Economics Association, vol. 40(3), pages 980-1007, August.
- Lai, Kon S., 2004. "On structural shifts and stationarity of the ex ante real interest rate," International Review of Economics & Finance, Elsevier, vol. 13(2), pages 217-228.
- Zhou, Su, 2003. "Interest rate linkages within the European Monetary System: new evidence incorporating long-run trends," Journal of International Money and Finance, Elsevier, vol. 22(4), pages 571-590, August.
- Rapach, David E. & Weber, Christian E., 2004. "Are real interest rates really nonstationary? New evidence from tests with good size and power," Journal of Macroeconomics, Elsevier, vol. 26(3), pages 409-430, September.
- Engle, Robert F. & Issler, Joao Victor, 1995. "Estimating common sectoral cycles," Journal of Monetary Economics, Elsevier, vol. 35(1), pages 83-113, February.
- John Thornton & Alicia García-Herrero, 1997. "Additional evidence on monetary base and interest rate linkages in the EMS," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 133(2), pages 359-368, 06.
- Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-28, August.
- Osterwald-Lenum, Michael, 1992. "A Note with Quantiles of the Asymptotic Distribution of the Maximum Likelihood Cointegration Rank Test Statistics," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 461-72, August.
- Zisimos Koustas & Jean-Francois Lamarche, 2010. "Evidence of nonlinear mean reversion in the real interest rate," Applied Economics, Taylor & Francis Journals, vol. 42(2), pages 237-248.
- Urga, Giovanni, 2007. "Common Features in Economics and Finance: An Overview of Recent Developments," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 2-11, January.
- Menzie D. Chinn & Guy Meredith, 2004. "Monetary Policy and Long-Horizon Uncovered Interest Parity," IMF Staff Papers, Palgrave Macmillan, vol. 51(3), pages 409-430, November.
When requesting a correction, please mention this item's handle: RePEc:eee:jmacro:v:34:y:2012:i:4:p:1125-1140. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.