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The term structure of interest rates, the expectations hypothesis and international financial integration: Evidence from Asian Economies

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Abstract

The validity of the expectations hypothesis of the term structure is examined for a sample of Asian countries. A panel stationarity testing procedure is employed that addresses both structural breaks and cross-sectional dependence. Asian term structures are found to be stationary and supportive of the expectations hypothesis. Further analysis suggests that international financial integration is associated with interdependencies between domestic and foreign term structures insofar as cross-term structures based on differentials between domestic (foreign) short- and foreign (domestic) long-rates are also stationary.

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  • Mark J. Holmes & Theodore Panagiotidis & Jesus Otero, 2010. "The term structure of interest rates, the expectations hypothesis and international financial integration: Evidence from Asian Economies," Discussion Paper Series 2010_18, Department of Economics, University of Macedonia, revised Nov 2009.
    • Handle: RePEc:mcd:mcddps:2010_18
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    Cited by:

    1. Kakali Kanjilal, 2014. "Rational expectation hypothesis: empirical evidence from government debt market in India," International Journal of Indian Culture and Business Management, Inderscience Enterprises Ltd, vol. 9(3), pages 353-370.
    2. Kanjilal, Kakali & Ghosh, Sajal, 2017. "Dynamics of crude oil and gold price post 2008 global financial crisis – New evidence from threshold vector error-correction model," Resources Policy, Elsevier, vol. 52(C), pages 358-365.
    3. David Gabauer & Sowmya Subramaniam & Rangan Gupta, 2022. "On the transmission mechanism of Asia‐Pacific yield curve characteristics," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 473-488, January.
    4. Li, Dandan & Ghoshray, Atanu & Morley, Bruce, 2012. "Measuring the risk premium in uncovered interest parity using the component GARCH-M model," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 167-176.
    5. Guerello, Chiara & Tronzano, Marco, 2020. "“Global factors, international spillovers, and the term structure of interest rates: New evidence for Asian Countries”," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    6. Cheng, Sheng & Cao, Yan, 2019. "On the relation between global food and crude oil prices: An empirical investigation in a nonlinear framework," Energy Economics, Elsevier, vol. 81(C), pages 422-432.
    7. Holmes, Mark J. & Otero, Jesús & Panagiotidis, Theodore, 2015. "The expectations hypothesis and decoupling of short- and long-term US interest rates: A pairwise approach," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 301-313.
    8. Paul Francois Muzindutsi & Sinethemba Mposelwa, 2016. "Testing the Expectations Hypothesis of the Term Structure of Interest Rates in Brics Countries: A Multivariate Co-integration Approach," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 12(4), pages 289-304, October.
    9. Tronzano, Marco, 2018. "Does the Expectations Hypothesis of the Term Structure Hold in Korea after the Asian Financial Crisis? Some Empirical Evidence (1999-2017)," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 71(2), pages 191-226.

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    More about this item

    Keywords

    Heterogeneous dynamic panels; term structure; mean reversion; panel stationarity test;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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