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International financial market integration and linkages of national interest rates

  • Adrian W. Throop
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    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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    File URL: http://www.frbsf.org/publications/economics/review/1994/94-3_3-18.pdf
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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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    1. Modjtahedi, Bagher, 1988. "Dynamics of real interest differentials : An empirical investigation," European Economic Review, Elsevier, vol. 32(6), pages 1191-1211, July.
    2. 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.).
    3. Charles Engel & Anthony P. Rodrigues, 1987. "Tests of International CAPM with Time-Varying Covariances," NBER Working Papers 2303, National Bureau of Economic Research, Inc.
    4. 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.
    5. Mishkin, Frederic S, 1984. " Are Real Interest Rates Equal across Countries? An Empirical Investigation of International Parity Conditions," Journal of Finance, American Finance Association, vol. 39(5), pages 1345-57, December.
    6. Bruce Kasman & Charles Pigott, 1988. "Interest rate divergences among the major industrial nations," Quarterly Review, Federal Reserve Bank of New York, issue Aut, pages 28-44.
    7. 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.
    8. Robert E. Cumby & Maurice Obstfeld, 1982. "International Interest-Rate and Price-Level Linkages Under Flexible Exchange Rates: A Review of Recent Evidence," NBER Working Papers 0921, National Bureau of Economic Research, Inc.
    9. Jeffrey A. Frankel, 1993. "On Exchange Rates," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061546, June.
    10. Adrian W. Throop, 1993. "A generalized uncovered interest parity model of exchange rates," Economic Review, Federal Reserve Bank of San Francisco, pages 3-16.
    11. 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.
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