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Integration of International Long‐Term Interest Rates: A Fractional Cointegration Analysis
Author(s) -
Hsueh L. Paul,
Pan MingShiun
Publication year - 1998
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.1998.tb01392.x
Subject(s) - cointegration , economics , interest rate , econometrics , term (time) , government bond , variance (accounting) , bond , government (linguistics) , monetary economics , accounting , finance , linguistics , philosophy , physics , quantum mechanics
In this study, we re‐examine the relationship among interest rates on the long‐term government bonds of five industrialized countries. Using both the variance ratio test and fractional cointegration analysis, we find significant evidence that indicates the five government bond rates are fractionally cointegrated. In specific, our results show that the error correction term of the system of the five interest rates follows a mean‐reverting, fractionally integrated process.