Long-term interest rates in Europe: A fractional cointegration analysis

Guglielmo Maria Caporale and Luis Gil-Alana

International Review of Economics & Finance, 2019, vol. 61, issue C, 170-178

Abstract: This paper uses fractional integration/cointegration techniques to examine the stochastic behaviour of long-term interest rates (on government securities with 10-year maturity) in 23 European countries as well as their long-run linkages on a pairwise basis over the period January 2001–February 2018. The results are mixed and sensitive to the (parametric and semi-parametric) estimation methods. Evidence is found for both unit roots and mean reversion in the series analysed. Various rates (especially in the case of smaller economies) appear to be fractionally cointegrated, but interestingly German, French and UK rates are not found to be linked to any other European rates.

Keywords: Long-term interest rates; Fractional integration; Fractional cointegration (search for similar items in EconPapers)
JEL-codes: C22 C32 G15 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:61:y:2019:i:c:p:170-178

DOI: 10.1016/j.iref.2019.02.004

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