Modeling International Long-Term Interest Rates

Posted: 14 Apr 2003

See all articles by Ramon P. DeGennaro

Ramon P. DeGennaro

University of Tennessee, Knoxville - Department of Finance

Robert A. Kunkel

University of Wisconsin - Oshkosh - Department of Finance

Junsoo Lee

University of Alabama - Department of Economics, Finance and Legal Studies

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Abstract

This study investigates the relationship among interest rates on the long-term governments bonds of five industrialized countries. Both standard and new unit root tests are applied, all of which confirm the presence of exactly one unit root. New cointegration tests are also applied to these data. In contrast to previous research on short-term bonds, stock prices, and exchange rates, these results find little evidence of cointegration among the five long-term interest rate series. Thus, when modeling or forecasting these central government long-term bond yields, one may assume separate sets of fundamentals and difference the data to achieve stationarity. An error correction model may not be appropriate.

Keywords: interest rates, cointegration, government bonds

JEL Classification: G1, F3, E4, C3, A1

Suggested Citation

DeGennaro, Ramon P. and Kunkel, Robert A. and Lee, Junsoo, Modeling International Long-Term Interest Rates. The Financial Review, Vol. 29, November 1994. Available at SSRN: https://ssrn.com/abstract=394360

Ramon P. DeGennaro (Contact Author)

University of Tennessee, Knoxville - Department of Finance ( email )

423 Stokely Management Center
Knoxville, TN 37996
United States
865-974-1726 (Phone)
865-974-1716 (Fax)

Robert A. Kunkel

University of Wisconsin - Oshkosh - Department of Finance ( email )

College of Business Administration
Oshkosh, WI 54901
United States
920-424-7191 (Phone)

Junsoo Lee

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL Alabama 35487
United States
2053488978 (Phone)

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