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The Interdependence of Australian and Foreign Real Interest Rates


Felmingham, BS and Zhang, Q and Healy, TJ, The Interdependence of Australian and Foreign Real Interest Rates, The Economic Record, 76, (233) pp. 163-171. ISSN 0013-0249 (2000) [Refereed Article]

DOI: doi:10.1111/j.1475-4932.2000.tb00014.x


We assess the interdependence of the Australian and foreign (USA, Japan, UK, Canada, Germany, NZ) short-term real rates of interest using a quarterly time series: 1970(1) to 1997(4). Applying Zivot and Andrews (1992) tests for stationarity subject to structural breaks we find all series to be I(1). Structural breaks occurring in each series at different times are explained by policy changes, institutional characteristics or shocks such as the second oil crisis. Conventional bivariate cointegration tests (without breaks) provide limited evidence of interdependence, however using the Gregory Hansen (1996a,b) technique it is clear that foreign and Australian rates are interrelated once structural breaks are accommodated. Multivariate cointegration and error correction modelling confirm this finding. Policy implications are indicated.

Item Details

Item Type:Refereed Article
Research Division:Economics
Research Group:Applied economics
Research Field:International economics
Objective Division:Economic Framework
Objective Group:Macroeconomics
Objective Field:Macroeconomics not elsewhere classified
UTAS Author:Felmingham, BS (Dr Bruce Felmingham)
UTAS Author:Zhang, Q (Ms Qing Zhang)
UTAS Author:Healy, TJ (Ms Tanya Healy)
ID Code:20208
Year Published:2000
Web of Science® Times Cited:1
Deposited By:Economics and Finance
Deposited On:2000-08-01
Last Modified:2001-06-18

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