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Université d'Orléans |  |
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Université d'Orléans | |
| HAL: hal-00507820, version 1 |
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| Synchronization and nonlinear interdependence of short-term interest rates: |
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| Mohamed El Hedi Arouri 1, 2F. Jawadi 1, 3 |
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| (2010-08-01) |
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| In this paper we investigate the synchronization and nonlinear adjustment process of short-term interest rates for France, the US and the UK using the bi-directional feedback measures proposed by Geweke (1982).and appropriate smooth transition error-correction models (STECM). We find strong evidence of continual increases in bilateral synchronization of these interest rates from 2005 to 2009 as well as of their lead-lag causal interactions with a slight dominance of the US rate. Consistently, exogenous shifts in the US rate are found to lead those in France and the UK within a very short time spans from one to two days. Results from nonlinear modeling indicate that short-term interest rates converge towards a common equilibrium in the long-run in a nonlinear manner in that their time dynamics exhibit regime-switching behavior. |
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| 1: | EconomiX |
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CNRS : UMR7166 – Université Paris X - Paris Ouest Nanterre La Défense |
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| 2: | Laboratoire d'économie d'Orleans (LEO) |
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CNRS : UMR6221 – Université d'Orléans |
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| 3: | Centre d'études et de recherches appliquées à la gestion (CERAG) |
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CNRS : UMR5820 – Université Pierre-Mendès-France - Grenoble II |
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| Subject | : | Quantitative Finance/Statistical Finance |
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| hal-00507820, version 1 | |
| http://hal.archives-ouvertes.fr/hal-00507820 | |
| oai:hal.archives-ouvertes.fr:hal-00507820 | |
| From: Mohamed El Hedi Arouri | |
| Submitted on: Sunday, 1 August 2010 19:49:23 | |
| Updated on: Monday, 2 August 2010 08:02:02 | |
