MODELING NONLINEAR AND HETEROGENEOUS DYNAMIC LINKS IN INTERNATIONAL MONETARY MARKETS
We use daily short-term interbank interest rates of France, the United Kingdom, and the United States to examine the dynamic links of international monetary markets from 2004 to 2009. Results from vector error-correction models and smooth-transition error-correction models show strong evidence of nonlinear and heterogeneous causalities between the three interest rates. We also find that changes in the U.S. interest rate deviations from the long-run equilibrium led those in France and in the United Kingdom by one to two days. Finally, the national interest rate nexus appears to converge in nonlinear fashion toward a steady state because it is subject to structural change beyond a certain rate threshold. Our findings have important implications for the actions of leading central banks (ECB, Bank of England, and U.S. Fed) because the joint behavior of short-term interest rates can be viewed as an indicator of the degree of central banks' policy interdependence.
Year of publication: |
2012
|
---|---|
Authors: | Arouri, Mohamed El Hedi ; Jawadi, Fredj ; Nguyen, Duc Khuong |
Published in: |
Macroeconomic Dynamics. - Cambridge University Press. - Vol. 16.2012, S2, p. 232-251
|
Publisher: |
Cambridge University Press |
Description of contents: | Abstract [journals.cambridge.org] |
Saved in:
Saved in favorites
Similar items by person
-
Stock market integration in Mexico and Argentina: are short- and long-term considerations different?
Jawadi, Fredj, (2010)
-
Arouri, Mohamed El Hedi, (2010)
-
Arouri, Mohamed El Hedi, (2010)
- More ...