Common Trends and Common Cycles among Interest Rates of the G7-Countries

25 Pages Posted: 2 Feb 2009

See all articles by Nannette Lindenberg

Nannette Lindenberg

German Development Institute/Deutsches Institut für Entwicklungspolitik (DIE)

Frank Westermann

University of Osnabrueck - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Date Written: January 2009

Abstract

In this paper we re-investigate the comovements of interest rates in the G7-countries. We propose a structured modus operandi to analyze the time series characteristics of interest rates and to test for common features. We conduct cointegration, serial correlation common feature and codependence tests with nominal and real interest rates using quarterly data from 1975 to 2007. Overall we only find little evidence of comovements. Common trends are occasionally observed, but the majority of interest rates are not cointegrated. Although some evidence for codependence of higher order is found among European countries, common cycles appear to exist only in rare cases and cannot be generalized for all interest rates.

Keywords: interest rates, comovement, cointegration, serial correlation common feature, codependence

JEL Classification: C22, E43, G12

Suggested Citation

Lindenberg, Nannette and Westermann, Frank, Common Trends and Common Cycles among Interest Rates of the G7-Countries (January 2009). CESifo Working Paper Series No. 2532. Available at SSRN: https://ssrn.com/abstract=1336497

Nannette Lindenberg (Contact Author)

German Development Institute/Deutsches Institut für Entwicklungspolitik (DIE) ( email )

Tulpenfeld 6
Bonn, 53113
Germany

Frank Westermann

University of Osnabrueck - Department of Economics ( email )

Rolandstr. 8
Osnabrueck, D-49069
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

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