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Common Factors in Eurocurrency Rates: A Dynamic Analysis

Author

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  • Drakos, Konstantinos

    () (London Guildhall University)

Abstract

The paper explores the issue of integration in the Eurocurrency market. In particular, by using information from the short end of the Eurodollar, Euromark and the Eurosterling term structures we focus on their multivariate correlation structure decomposing it into common (systemic) and idiosyncratic components. The empirical analysis employs the Johansen Multivariate Cointegration methodology and the Principal Components Analysis in order to test for the presence of any dynamic common factors among the selected Eurocurrency interest rates. The findings provide evidence in favour of an integrated market.

Suggested Citation

  • Drakos, Konstantinos, 2002. "Common Factors in Eurocurrency Rates: A Dynamic Analysis," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 17, pages 164-184.
  • Handle: RePEc:ris:integr:0190
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    Cited by:

    1. Damiana Giuseppina Costanzo & Damiano Bruno Silipo & Marianna Succurro, 2013. "Over-Indebtedness And Innovation: Some Preliminary Results," Working Papers 201304, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    2. Konstantinos Drakos, 2004. "A Note on Sector, Rating, and Maturity Effects on Risk Premia," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 3(3), pages 201-216, December.

    More about this item

    Keywords

    Cointegration; Common Factors; Eurocurrency Market; Principal Component Analysis;

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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