The International Financial Market and U.S. Interest Rates
This paper examines the linkages between the Eurodollar and U.S. domestic financial markets. Despite the fact that these markets are characterized by rapid arbitrage of interest rate differentials, it is shown that using weekly data allows the isolation of significant fluctuations being transmitted between markets in both directions. That is, financial markets in the U.S. are affected significantly by foreign events and the Eurodollar market is significantly affected by events occurring in the U.S. Since a moderate amount of arbitrage occurs within a week's time and because there is no way to determine the source of any disturbances which affect both interest rates simultaneously, it is impossible to reach precise conclusions about the causes of historical variation in the rates. However, this paper provides evidence that at most forty percent of the variation in Eurodollar interest rates over the 1975-1978 period can be traced to domestic U.S. sources and that between about one-fifth and two-thirds of the variation in domestic rates can be traced to foreign sources.
|Date of creation:||Dec 1980|
|Date of revision:|
|Publication status:||published as Hartman, David G. "The International Financial Market and U.S. Interest Rates." Journal of International Money and Finance. Vol. 3, (April 1984), pp . 91-103.|
|Note:||ME ITI IFM|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brunner, Karl & Meltzer, Allan H., 1979. "Three aspects of policy and policymaking: Knowledge, data and institutions," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 10(1), pages 1-7, January.
- Robert Aliber, 1978. "The integration of National financial markets: A review of theory and findings," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 114(3), pages 448-480, September.
- Jacobs, Rodney L & Leamer, Edward E & Ward, Michael P, 1979.
"Difficulties with Testing for Causation,"
Western Economic Association International, vol. 17(3), pages 401-13, July.
- Rodney H. Mills, Jr., 1973. "Structural change in the Eurodollar market: evidence from a two- equation model," International Finance Discussion Papers 33, Board of Governors of the Federal Reserve System (U.S.).
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
- Kwack, Sung Y, 1971. "The Structure of International Interest Rates: An Extension of Hendershott's Tests," Journal of Finance, American Finance Association, vol. 26(4), pages 897-900, September.
- Sargent, Thomas J, 1978.
"Estimation of Dynamic Labor Demand Schedules under Rational Expectations,"
Journal of Political Economy,
University of Chicago Press, vol. 86(6), pages 1009-44, December.
- Thomas J. Sargent, 1978. "Estimation of dynamic labor demand schedules under rational expectations," Staff Report 27, Federal Reserve Bank of Minneapolis.
- Chung Lee, 1977. "A Survey of the literature on the determinants of foreign portfolio investments in the United States," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 113(3), pages 552-569, September.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:0598. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.