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Real interest rate interdependence among the G7 nations: does real interest parity hold?

Citation

Felmingham, BS and Cooray, AV, Real interest rate interdependence among the G7 nations: does real interest parity hold?, Journal of International Finance and Economics, 8, (1) pp. 14-22. ISSN 1555-6336 (2008) [Refereed Article]

Copyright Statement

Copyright 2008 IABE

Official URL: http://www.iabe.org/domains/iabeX/journalinfo.aspx...

Abstract

We evaluate the extent of real interest rate interdependence among three month treasury bill rates of the G7. Monthly data over the period 1970(1) to 2003(12) is subjected to recursive estimation of a cointegrating equation. The evidence suggests a high degree of interdependence between the G7 interest rates with the degree of integration increasing over the sample period. Tests for parameter constancy highlight the disruptive effects of the first oil price shock although the impacts on financial markets of the September 11 and the attack occurrence of the Asian crisis have limited impacts. The evidence for the presence of a leading nation among the G7 is inconclusive although Germany and the US are the prime leadership contenders. The high degree of interdependence between the G7 financial markets suggests that capital between the G7 is highly mobile.

Item Details

Item Type:Refereed Article
Keywords:among, hold, interdependence, parity, rate, interest, real, does, nations, g7
Research Division:Economics
Research Group:Applied Economics
Research Field:International Economics and International Finance
Objective Division:Economic Framework
Objective Group:Macroeconomics
Objective Field:Monetary Policy
Author:Felmingham, BS (Dr Bruce Felmingham)
Author:Cooray, AV (Dr Arusha Cooray)
ID Code:55790
Year Published:2008
Deposited By:Economics and Finance
Deposited On:2009-03-13
Last Modified:2017-02-13
Downloads:0

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