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International Interest Rate Linkages in the Term Structure

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  • Johnson, David R

Abstract

This paper considers one aspect of the relationship between returns on long-term bonds denominated in Canadian dollars issued by the Canadian federal government and long-term bonds denominated in American dollars issued by the American federal government. The difference between a component of the term premium in the Canadian dollar term structure and the same component of the term premium in the American dollar term structure is measured at three terms to maturity. The measurement compares ex ante excess returns earned on Canadian dollar long-term bonds and excess returns earned on American dollar long-term bonds. The evidence supports the existence of currency-specific term premia which vary over time. Copyright 1993 by Ohio State University Press.

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  • Johnson, David R, 1993. "International Interest Rate Linkages in the Term Structure," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(4), pages 755-770, November.
    • Handle: RePEc:mcb:jmoncb:v:25:y:1993:i:4:p:755-70
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    Cited by:

    1. Vladimir Borgy & Valérie Mignon, 2009. "Taux d’intérêt et marchés boursiers : une analyse empirique de l’intégration financière internationale," Économie et Prévision, Programme National Persée, vol. 187(1), pages 105-121.
    2. Lothian, James R., 2002. "The internationalization of money and finance and the globalization of financial markets," Journal of International Money and Finance, Elsevier, vol. 21(6), pages 699-724, November.
    3. Jotikasthira, Chotibhak & Le, Anh & Lundblad, Christian, 2015. "Why do term structures in different currencies co-move?," Journal of Financial Economics, Elsevier, vol. 115(1), pages 58-83.
    4. Lawrence Goldberg & James Lothian & John Okunev, 2003. "Has International Financial Integration Increased?," Open Economies Review, Springer, vol. 14(3), pages 299-317, July.
    5. Holmes, Mark J & Pentecost, Eric J, 1997. "The Term Structure of Interest Rates and Financial Integration in the ERM," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(3), pages 237-247, July.
    6. Catherine Bruneau & Eric Jondeau, 1999. "Long‐run Causality, with an Application to International Links Between Long‐term Interest Rates," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(4), pages 545-568, November.
    7. Laurence Booth & George Georgopoulos & Walid Hejazi, 2007. "What drives provincial‐Canada yield spreads?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 40(3), pages 1008-1032, August.
    8. Anoruo, Emmanuel & Ramchander, Sanjay & Thiewes, Harold F., 2002. "International linkage of interest rates: Evidence from the emerging economies of Asia," Global Finance Journal, Elsevier, vol. 13(2), pages 217-235.

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