Abstract

http://ssrn.com/abstract=2462255
 


 



Emerging Market Economies and the World Interest Rate


Berrak Bahadir


University of Georgia

William D. Lastrapes


University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics

July 3, 2014


Abstract:     
We use the estimated common factor from a dynamic factor model of industrialized economy interest rates as a measure of the underlying world interest rate. Our innovation is to exploit information from observed yields in many countries about global capital markets, rather than rely solely on US yields as is typical of the empirical literature. We show that rates in these countries closely conform to the world rate in the face of global shocks since the late 1980's, which is consistent with capital market integration. Using a FAVAR, we examine the role of our estimated world rate in explaining interest rates from emerging market countries. We find evidence of capital market integration for these countries, at least in the long-run.

Number of Pages in PDF File: 46

Keywords: FAVAR, dynamic factor models, capital market integration, capital mobility

JEL Classification: O1, F3, F4

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Date posted: July 5, 2014  

Suggested Citation

Bahadir, Berrak and Lastrapes, William D., Emerging Market Economies and the World Interest Rate (July 3, 2014). Available at SSRN: http://ssrn.com/abstract=2462255

Contact Information

Berrak Bahadir
University of Georgia ( email )
Athens, GA 30602-6254
United States
William D. Lastrapes (Contact Author)
University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )
Terry College of Business
Athens, GA 30602-6254
United States
706-542-3569 (Phone)
706-542-3376 (Fax)
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