Abstract

http://ssrn.com/abstract=2462255
 


 



Emerging Market Economies and the World Interest Rate


Berrak Buyukkarabacak


Ozyegin University

William D. Lastrapes


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

May 10, 2015


Abstract:     
We use a Factor Augmented VAR model to estimate the dynamic responses of interest rates in emerging market economies to the 'world' interest rate, which we extract from a dynamic factor model of yields in industrialized countries. Our results provide evidence that many emerging market yields respond to world rate shocks, at least gradually, which is broadly consistent with capital market integration. Our findings also suggest that the world rate captures information about emerging market yields not contained in US rates, which are typically used to proxy for the world rate.

Number of Pages in PDF File: 38

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

JEL Classification: O1, F3, F4


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Date posted: July 5, 2014 ; Last revised: May 13, 2015

Suggested Citation

Buyukkarabacak, Berrak and Lastrapes, William D., Emerging Market Economies and the World Interest Rate (May 10, 2015). Available at SSRN: http://ssrn.com/abstract=2462255

Contact Information

Berrak Bahadir
Ozyegin University ( email )
Kusbakisi Cd. No: 2
Altunizade Uskudar
Istanbul, 34662
Turkey
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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