Real Interest Rate Linkages in the Pacific Basin Region
Jae H. Kim
La Trobe University; Financial Research Network (FIRN)
Monash University - Department of Accounting and Finance; Financial Research Network (FIRN)
This paper examines the linkage of real interest rates of a group of Pacific-Basin countries with a focus on East Asia. We consider monthly real interest rates of the US, Japan, Korea, Singapore, and Thailand from 1980 to 2004. The impulse response analysis and half-life estimation are conducted in a multivariate setting, adopting the bias-corrected bootstrap as a means of statistical inference. It is found that the degree of capital market integration has increased after the Asian financial crisis in 1997. The evidence suggests that the crisis has substantially changed the nature of the short run interactions among the real interest rates. Before the crisis, both the US and Japanese capital markets dominated the region. However, after the crisis, the dominance of the Japanese market has completely disappeared, while the US remains as a sole dominant player.
Number of Pages in PDF File: 31
Keywords: Asian financial crisis, Bias-correction, Bootstrapping, Capital market Integration, Half-life, Impulse response analysis, Vector autoregression
JEL Classification: F36, E44working papers series
Date posted: August 31, 2005
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