IDEAS home Printed from https://ideas.repec.org/a/zag/zirebs/v3y2000i2p39-61.html
   My bibliography  Save this article

International Linkages in Short- and Long-Term Interest Rates

Author

Listed:
  • Guglielmo Maria Caporale

    (South Bank Business School, London)

  • Geoffrey Williams

    (London Business School)

Abstract

This paper examines interest rate linkages in the G7 economies by testing for cointegration and employing the causality testing method for unstable systems recently introduced by Toda and Yamamoto (1995), which results in standard asymptotics. The results show that whilst domestic macroeconomic variables are important determinants of long-term interest rates, international linkages play a major role in the case of short-term rates. We also find that causation within the ERM runs from France to Germany, which suggests that, in order to function smoothly, a system such as the ERM requires its largest player to accommodate policy variation elsewhere, rather than impose its own monetary stance as in the ‘German Leadership Hypothesis’ (GLH). The main results are confirmed by the stability analysis.

Suggested Citation

  • Guglielmo Maria Caporale & Geoffrey Williams, 2000. "International Linkages in Short- and Long-Term Interest Rates," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 3(2), pages 39-61, November.
    • Handle: RePEc:zag:zirebs:v:3:y:2000:i:2:p:39-61
    as

    Download full text from publisher

    File URL: http://www.efzg.hr/default.aspx?id=2695
    Download Restriction: Abstract only available on-line
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Barassi, Marco R. & Caporale, Guglielmo Maria & Hall, Stephen G., 2005. "Interest rate linkages: a Kalman filter approach to detecting structural change," Economic Modelling, Elsevier, vol. 22(2), pages 253-284, March.

    More about this item

    Keywords

    Causality Testing; Cointegrated VARs; Interest Rate Linkages; ERM; German Leadership Hypothesis (GLH);
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • F3 - International Economics - - International Finance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zag:zirebs:v:3:y:2000:i:2:p:39-61. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jurica Šimurina (email available below). General contact details of provider: https://edirc.repec.org/data/fefzghr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.