Who leads the Australian interest rates in the short and long run? An application of long run structural modelling

A. Mansur M. Masih; Trent Winduss

doi:10.1142/S0219091506000628

Who leads the Australian interest rates in the short and long run? An application of long run structural modelling

A. Mansur M. Masih^*, Trent Winduss

^*Corresponding author for this work

King Fahd University of Petroleum & Minerals

Research output: Contribution to journal › Article › peer-review

4 Scopus citations

Abstract

The focus of this paper is to test the cointegrating and Granger-causal relationships between Australian short-run interest rate securities and those of the UK, US, Japan, Hong Kong, Singapore and New Zealand. A relatively new methodology known as Long Run Structural Model (LRSM) (Pesaran and Shin, 2002) followed by vector error-correction model, generalized variance decompositions, generalized impulse response, and persistence profile have been used. The findings tend to suggest that Australia's short-term interest rates are cointegrated with those of its major trading partners. The results of this paper indicate that the ability of Australian policy makers to target and manipulate domestic interest rates may be limited and that they should look to the policy decisions of the US and Japan in particular when setting domestic policy.

Original language	English
Pages (from-to)	1-24
Number of pages	24
Journal	Review of Pacific Basin Financial Markets and Policies
Volume	9
Issue number	1
DOIs	https://doi.org/10.1142/S0219091506000628
State	Published - Mar 2006

Bibliographical note

Funding Information:
∗The generous financial support given by King Fahd University of Petroleum and Minerals, Saudi Arabia is gratefully acknowledged. †Corresponding author.

Keywords

Australian economic integration
Cointegration
Granger causality
Long run structural modelling

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1142/S0219091506000628

Cite this

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abstract = "The focus of this paper is to test the cointegrating and Granger-causal relationships between Australian short-run interest rate securities and those of the UK, US, Japan, Hong Kong, Singapore and New Zealand. A relatively new methodology known as Long Run Structural Model (LRSM) (Pesaran and Shin, 2002) followed by vector error-correction model, generalized variance decompositions, generalized impulse response, and persistence profile have been used. The findings tend to suggest that Australia's short-term interest rates are cointegrated with those of its major trading partners. The results of this paper indicate that the ability of Australian policy makers to target and manipulate domestic interest rates may be limited and that they should look to the policy decisions of the US and Japan in particular when setting domestic policy.",

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Who leads the Australian interest rates in the short and long run? An application of long run structural modelling

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

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