Real Interest Rate Linkages in the Pacific Basin Region

31 Pages Posted: 31 Aug 2005

See all articles by Jae H. Kim

Jae H. Kim

affiliation not provided to SSRN

Philip Ji

Monash University - Department of Accounting; Financial Research Network (FIRN)

Date Written: October 2005

Abstract

This paper examines the linkage of real interest rates of a group of Pacific-Basin countries with a focus on East Asia. We consider monthly real interest rates of the US, Japan, Korea, Singapore, and Thailand from 1980 to 2004. The impulse response analysis and half-life estimation are conducted in a multivariate setting, adopting the bias-corrected bootstrap as a means of statistical inference. It is found that the degree of capital market integration has increased after the Asian financial crisis in 1997. The evidence suggests that the crisis has substantially changed the nature of the short run interactions among the real interest rates. Before the crisis, both the US and Japanese capital markets dominated the region. However, after the crisis, the dominance of the Japanese market has completely disappeared, while the US remains as a sole dominant player.

Keywords: Asian financial crisis, Bias-correction, Bootstrapping, Capital market Integration, Half-life, Impulse response analysis, Vector autoregression

JEL Classification: F36, E44

Suggested Citation

Kim, Jae H. and Ji, Philip Inyeob, Real Interest Rate Linkages in the Pacific Basin Region (October 2005). Available at SSRN: https://ssrn.com/abstract=791284 or http://dx.doi.org/10.2139/ssrn.791284

Jae H. Kim (Contact Author)

affiliation not provided to SSRN

Philip Inyeob Ji

Monash University - Department of Accounting ( email )

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Clayton, Victoria 3800
Australia

Financial Research Network (FIRN)

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