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Linkages among US Interest Rates and East Asian Purchases of US Treasury Securities

  • Dene Hurley
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    Recent increases in East Asian purchases of US treasury securities has led to growing concern over its impact on the US economy, particularly on the US long-term and short-term interest rates. The vector error-correction model results revealed the presence of long-run causal relations among the federal funds rate, the 10-year Treasury rate and the East Asian demand in addition to a unidirectional short-run causal relation from the 10-year rate to the Federal funds rate. The variance decomposition and impulse response findings indicated that the Asian demand for US assets has a limited but negative impact on the 10-year US Treasury interest rate. The transmission of the East Asian demand shock on both interest rates was almost immediate. The Federal funds rate is found to have a significant negative impact on the long-term rate.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/12265080903391800
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    Article provided by Taylor & Francis Journals in its journal Global Economic Review.

    Volume (Year): 38 (2009)
    Issue (Month): 4 ()
    Pages: 397-408

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    Handle: RePEc:taf:glecrv:v:38:y:2009:i:4:p:397-408
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