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Long- and short-term interest rates in 19 countries: Tests of cointegration and parameter instability

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  • A. Arize
  • J. Malindretos
  • Z. Obi

Abstract

This paper examines the long-run relationship between short-term and long-term interest rates (both nominal and real) in 19 countries, and explores the possibility that the relationship is statistically stable using Lc, MeanF, and SupF statistics suggested by Hansen [1992]. Empirical results obtained from various cointegration techniques (Johansen, Phillips and Hansen, Stock and Watson, and Park) and quarterly data (1973–1998) show considerable support for the expectations hypothesis in all countries (except the United Kingdom). In a majority of cases, it is also found that a stable relationship exists between the short-term and long-term interest rates. Copyright International Atlantic Economic Society 2002

Suggested Citation

  • A. Arize & J. Malindretos & Z. Obi, 2002. "Long- and short-term interest rates in 19 countries: Tests of cointegration and parameter instability," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 30(2), pages 105-120, June.
  • Handle: RePEc:kap:atlecj:v:30:y:2002:i:2:p:105-120
    DOI: 10.1007/BF02299156
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    References listed on IDEAS

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    Cited by:

    1. Bernard Njindan Iyke, 2015. "On the Term Structure of South African Interest Rates: Cointegration and Threshold Adjustment," Working Papers 557, Economic Research Southern Africa.
    2. Njindan Iyke, Bernard, 2017. "Asymmetries in Yield Curves: Some Empirical Evidence from Ghana," MPRA Paper 79155, University Library of Munich, Germany.
    3. Osmani Teixeira De Carvalho Guillen & Benjamin M. Tabak, 2009. "Characterising the Brazilian term structure of interest rates," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 2(2), pages 103-114.
    4. Robert J. Kauffman & Charles A. Wood, 2007. "Follow the leader: price change timing in Internet-based selling," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 679-700.

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