Nonlinear aspects of capital market integration and real interest rate equalization

Mancuso, Anthony J.; Goodwin, Barry K.; Grennes, Thomas

doi:10.1016/s1059-0560(03)00019-4

Cited by 53 publications

(56 citation statements)

References 24 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…The ad hoc setting of the maximum delay to eight months leaves room for the sluggish adjustment in goods markets to take place in addition to the much faster corrections in financial markets. It remains close to the range implied by the half-lives of deviations running into several months in studies by Nakagawa's (2002) and Mancuso, Goodwin and Grennes (2002). The value of the delay parameter d * that minimizes the p-value associated with H 0 in the auxiliary regression (13) is lowest (highest) for Thailand (Malaysia) with respect to both the U.S. and Japan.…”

Section: Resultssupporting

confidence: 56%

“…For example, Balke and Wohar (1998) find non-linearities in the adjustment towards covered interest parity (CIP) between the UK and U.S. where the non-linearity is dependant on the size of the shock to CIP in relation to the transactions cost bandwidth. Mancuso, Goodwin and Grennes (2002) also find that generally the larger the magnitude of the shock, the faster the adjustment. The methodology followed in these studies is based on threshold autoregression on the grounds that arbitrage towards CIP will suddenly occur once the transactions cost band is breached.…”

Section: Methodology and Datamentioning

confidence: 70%

See 1 more Smart Citation

Asian real interest rates, nonlinear dynamics, and international parity

Holmes

Maghrebi

2004

International Review of Economics & Finance

View full text Add to dashboard Cite

This study tests for non-linearities in the real interest differentials of four South East Asian economies with respect toThe extent to which real interest rates are equalized across countries has occupied researchers for a number of reasons. In an open economy, real interest rates play a key role in influencing real activity through saving and investment behavior. Confirmation or rejection of real interest parity (RIP) provides an indication of whether countries are financially integrated or autonomous. However, since RIP requires that ex ante purchasing power parity (PPP) holds, it can be viewed as a more general indicator of 3 macroeconomic integration or convergence. RIP is also important because it is a key working assumption in various models of exchange rate determination and the focus of many studies as early as Frenkel (1976), Mussa (1976) and Frankel (1979). The purpose of this paper is to examine how plausible such an assumption is and whether or not adjustments towards RIP between South East Asian economies and Japan and the U.S. can be characterized as non-linear. (2000), Sarno (2000aSarno ( , 2000b, Sarantis (1999) and Michael et al. (1997), provide strong argument and empirical evidence of nonlinearities mainly with respect to OECD real exchange rates. The importance of evidence on non-linearities in real exchange rates derives from the fact that it may be reflect the degree of heterogeneity of foreign exchange market participants in terms of the formulation of objective functions and formation of expectations.1 It is against the background of recent research trends and the importance of non-linearity in

show abstract

Section: Resultssupporting

confidence: 56%

Section: Methodology and Datamentioning

confidence: 70%

Asian real interest rates, nonlinear dynamics, and international parity

Holmes

Maghrebi

2004

International Review of Economics & Finance

View full text Add to dashboard Cite

show abstract

“…Wu and Chen (1998), Gagnon and Unferth (1995) and Ong et al (1999) increase power through panel data tests, providing evidence in favour of RIP. 4 More recently, a number of studies, including Obstfeld and Taylor (2002), Nakagawa (2002), Mancuso et al (2003), Holmes and Maghrebi (2006) and Ferreira and Leon-Ledesma (2007), estimate non-linear models upholding RIRD mean-reversion, though not always around a zero value. 5 Overall, the recent literature has achieved significant progress towards overturning the early unit root RIRD findings.…”

Section: Introductionmentioning

confidence: 99%

Do real interest rates converge? Evidence from the European union

Arghyrou

Gregoriou

Kontonikas

2009

Journal of International Financial Markets, Institutions and Mo

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Andros GregoriouBrunel Business School Alexandros Kontonikas University of Glasgow, Department of Economics AbstractWe test for real interest parity (RIP) in the EU25 area. Our contribution is two-fold: First, we account for the previously overlooked effects of structural breaks on real interest rate differentials. Second, we test for RIP against the EMU average. For the majority of our sample countries we obtain evidence of real interest rate convergence towards the latter. Convergence, however, is a gradual process subject to structural breaks, typically falling close to the launch of the euro. Our findings have important implications relating to the single monetary policy and the progress new EU members have achieved towards joining the euro.

show abstract

“…According to Ferreira et al (2007), few studies have tested RIPH via Unit Root analysis on RIDs and the literature does not offer a conclusive answer (Meese & Rogoff, 1988), (Edison & Pauls, 1993), (Obsfeld & Taylor, 2002), (Mancuso, Goodwin, & Grennes, 2003).…”

Section: Introductionmentioning

confidence: 99%

Financial Market Integration of South Asian Countries: Panel Data Analysis

Mohsin¹,

Rivers²

2011

IJEF

View full text Add to dashboard Cite

In order to attain financial integration using the Feldstein Horoika (FH) model, the real interest rates differentials must be short lived. This paper estimates the degree of financial market integration in South Asian countries (i.e., Pakistan, India, Bangladesh, Sri Lanka and Nepal) utilizing both techniques i.e. FH model and Real Interest Rates Differentials (RIDs). This study shows some degree of integration with the FH model which has increased in post liberalization period since the 1990's. The estimates from (RIDs) methodology showed that real interest rates differentials of South Asian countries are found to be stationary when compared with the United States, Canada, United Kingdom, Germany, Sweden, Netherlands, Australia, Malaysia, Indonesia, South Korea, Singapore, China and Japan. The empirical evidence of integration using both techniques is a unique finding in the literature. Even though the RIDs technique provides strong evidence of integration, correlation between savings and investment is still significant.

show abstract

Nonlinear aspects of capital market integration and real interest rate equalization

Cited by 53 publications

References 24 publications

Asian real interest rates, nonlinear dynamics, and international parity

Asian real interest rates, nonlinear dynamics, and international parity

Do real interest rates converge? Evidence from the European union

Financial Market Integration of South Asian Countries: Panel Data Analysis

Contact Info

Product

Resources

About