Central Bank Policy Rates: Are they Cointegrated?

Guglielmo Maria Caporale, Hector Carcel and Luis Gil-Alana

No 6389, CESifo Working Paper Series from CESifo

Abstract: This paper analyses the stochastic properties of and the bilateral linkages between the central bank policy rates of the US, the Eurozone, Australia, Canada, Japan and the UK using fractional integration and cointegration techniques respectively. The univariate analysis suggests a high degree of persistence in all cases: the fractional integration parameter d is estimated to be above 1, ranging from 1.26 (US) to 1.48 (UK), with the single exception of Japan, for which the unit root null cannot be rejected. Concerning the bivariate results, Australian interest rates are found to be cointegrated with the Eurozone and UK ones, Canadian rates with the UK and US ones, and Japanese rates with the UK ones. The increasingdegree of integration of international financial markets and the coordinated monetary policy responses following the global financial crisis might both account for such linkages.

Keywords: interest rates; long memory; fractional integration and cointegration (search for similar items in EconPapers)
JEL-codes: C22 C32 E47 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Central bank policy rates: Are they cointegrated? (2017)
Journal Article: Central bank policy rates: Are they cointegrated? (2017)
Working Paper: Central Bank Policy Rates: Are They Cointegrated? (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_6389

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