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Has International Financial Integration Increased?

  • Lawrence G. Goldberg

    (University of Miami)

  • James R. Lothian

    (Fordham University)

  • John Okunev

    (Principal Global Investors)

This paper compares the behavior of real interest rate differentials across the major countries under the Bretton Woods regime and the regime of floating exchanges that replaced it. The primary object is to investigate both the extent of market integration and its changes over time. For all fifteen possible country pairs real interest differential are mean reverting, and in two-thirds of these cases indistinguishable from zero statistically. For all country pairs on average and for most such pairs individually, moreover, the estimated differentials are not appreciably different in absolute values than the differentials that we estimate for various money-market rates within the United States. Additional evidence points to a narrowing of differentials under floating rates over time and an increase in speeds of convergence.

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Paper provided by EconWPA in its series International Finance with number 0311004.

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Length: 32 pages
Date of creation: 12 Nov 2003
Date of revision:
Handle: RePEc:wpa:wuwpif:0311004
Note: Type of Document - pdf; pages: 32
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