Integration of International Long-Term Interest Rates: A Fractional Cointegration Analysis
Posted: 10 Aug 1998
In this study, we re-examine the relationship among interest rates on the long-term government bonds of five industrialized countries. Using both the variance ratio test and fractional cointegration analysis, we find significant evidence that indicates the five government bond rates are fractionally cointegrated. In specific, our results show that the error correction term of the system of the five interest rates follows a mean-reverting, fractionally integrated process.
JEL Classification: E43, G12
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