Linear and nonlinear Granger causality between short-term and long-term interest rates: a rolling-window strategy

Azadeh Rahimi, Ba Chu and Marc Lavoie

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Abstract: In this paper, a rolling window strategy is employed to detect the linear and nonlinear Granger causality relationships between the U.S. federal funds rate and the 10-year government bond rate, during different time horizons, investigating whether these causalities change with the passing of time. For linear Granger causality tests, we apply the Toda-Yamamoto (1995) approach and for nonlinear ones we use a nonlinear Granger causality test introduced by Diks and Panchenko (2006). Our findings show that during nearly all time periods there is a significant two-way Granger causality relationship between these two interest rates.

Keywords: Short-term interest rate; Long-term interest rates; Granger causality; Rolling window strategy (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

Published in Metroeconomica, 2017

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Journal Article: Linear and Non-Linear Granger Causality Between Short-Term and Long-Term Interest Rates: A Rolling Window Strategy (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01435721

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