Common Trends and Common Cycles among Interest Rates of the G7-Countries
25 Pages Posted: 2 Feb 2009
Date Written: January 2009
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: Suggested Citation