Common trends and common cycles among interest rates of the G7-countries

Nannette Lindenberg and Frank Westermann

Journal of Macroeconomics, 2012, vol. 34, issue 4, 1125-1140

Abstract: Both, from a macroeconomic modeling perspective, as well as for a policy point of view, there has recently been a renewed interest in the cyclical and long-run comovement of interest rates. In this paper we re-investigate the long- and short-run comovements in the G7-countries by conducting tests for cointegration, common serial correlation and codependence with nominal and real interest rates, using quarterly data from 1975 to 2010. Overall, we find only 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 in the pre-Euro area sample, common cycles appear to exist only in rare cases. We argue that some earlier, more positive findings are difficult to reconcile due to differing assumptions about the underlying stochastic properties of interest rates. We conclude that they cannot be generalized for all interest rates, time periods, and reasonable alternative estimation procedures.

Keywords: Interest rates; Comovement; Cointegration; Serial correlation common feature; Codependence (search for similar items in EconPapers)
JEL-codes: C22 E43 F30 G12 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Common Trends and Common Cycles among Interest Rates of the G7-Countries (2009)
Working Paper: Common Trends and Common Cycles among Interest Rates of the G7-Countries (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:34:y:2012:i:4:p:1125-1140

DOI: 10.1016/j.jmacro.2012.06.006

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