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Convergence of interest rates around the Pacific Rim

  • Hsiu-Yun Lee
  • Jyh-Lin Wu
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    This article applies the panel data unit root tests provided by Im, Pesaran and Shin (Discussion paper, 1997) to examine the interest rate convergence of small-open Asian countries with major financial centres. With monthly data from 1988:1 to 1997:6, it was found that the nominal interest rates of these countries converge to the US rates rather than to Japan's. This finding is consistent with the view that the monetary authorities of non-Japan Asian economies pegged their exchange rates overwhelmingly to the dollar rather than the yen before the financial crisis of 1997.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/0003684042000238929
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    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 36 (2004)
    Issue (Month): 12 ()
    Pages: 1281-1288

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    Handle: RePEc:taf:applec:v:36:y:2004:i:12:p:1281-1288
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    1. Shiller, Robert J. & Perron, Pierre, 1985. "Testing the random walk hypothesis : Power versus frequency of observation," Economics Letters, Elsevier, vol. 18(4), pages 381-386.
    2. repec:ner:tilbur:urn:nbn:nl:ui:12-3108730 is not listed on IDEAS
    3. John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Technical Working Papers 0100, National Bureau of Economic Research, Inc.
    4. Takatoshi Ito & Eiji Ogawa & Yuri Nagataki Sasaki, 1999. "How Did the Dollar Peg Fail in Asia?," NBER Working Papers 6729, National Bureau of Economic Research, Inc.
    5. Meese, Richard A & Singleton, Kenneth J, 1982. " On Unit Roots and the Empirical Modeling of Exchange Rates," Journal of Finance, American Finance Association, vol. 37(4), pages 1029-35, September.
    6. Jeremy Berkowitz & Lutz Kilian, 2000. "Recent developments in bootstrapping time series," Econometric Reviews, Taylor & Francis Journals, vol. 19(1), pages 1-48.
    7. Jeffrey A. Frankel, 1985. "International Capital Mobility and Crowding Out in the U.S. Economy: Imperfect Integration of Financial Markets or of Goods Markets?," NBER Working Papers 1773, National Bureau of Economic Research, Inc.
    8. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    9. Bernard, Andrew B & Durlauf, Steven N, 1995. "Convergence in International Output," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 97-108, April-Jun.
    10. Taylor, Mark P. & Sarno, Lucio, 1998. "The behavior of real exchange rates during the post-Bretton Woods period," Journal of International Economics, Elsevier, vol. 46(2), pages 281-312, December.
    11. Chinn, Menzie D & Frankel, Jeffrey A, 1995. "Who drives real interest rates around the Pacific Rim: the USA or Japan?," Journal of International Money and Finance, Elsevier, vol. 14(6), pages 801-821, December.
    12. Abuaf, Niso & Jorion, Philippe, 1990. " Purchasing Power Parity in the Long Run," Journal of Finance, American Finance Association, vol. 45(1), pages 157-74, March.
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