Causal linkages between US and Eurodollar interest rates: further evidence
This study examines causal linkages between US and Eurodollar interest rates during 1983-2002. Recursive cointegration analysis shows that a stable cointegration relationship between the two interest rates emerges only since the early 1990s, when the Fed used federal funds rate targeting and eliminated the reserve requirement on Eurocurrency deposits. The study further reveals that bidirectional causality exists between the two rates over the period of 1993 to 2002, while unidirectional causality from Eurodollar rate to the US rate is found to exist over the period of 1983 to 1991. These findings consistently support increased interest rate linkages especially since the early 1990s.
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Volume (Year): 39 (2007)
Issue (Month): 2 ()
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References listed on IDEAS
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- Henrik Hansen & Søren Johansen, 1999. "Some tests for parameter constancy in cointegrated VAR-models," Econometrics Journal, Royal Economic Society, vol. 2(2), pages 306-333.
- Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
- Jian Yang, 2003. "Market Segmentation and Information Asymmetry in Chinese Stock Markets: A VAR Analysis," The Financial Review, Eastern Finance Association, vol. 38(4), pages 591-609, November.
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- Phylaktis, Kate, 1999. "Capital market integration in the Pacific Basin region: an impulse response analysis," Journal of International Money and Finance, Elsevier, vol. 18(2), pages 267-287, February.
- Jian Yang, 2006. "Information transmission between Eurocurrency and domestic interest rates: evidence from the UK," Applied Financial Economics, Taylor & Francis Journals, vol. 16(9), pages 675-685.
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