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The relative impacts of Japanese and US interest rates on local interest rates in Australia and Singapore: a Granger causality test

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  • Jordan Shan
  • Nick Pappas

Abstract

This study investigates the relative influences of Japanese and US interest rates upon the movement of local interest rates in two small and open APEC economies, Australia and Singapore. The Granger no-causality testing procedure developed by Toda and Yamamoto was applied, in a three-variable vector autoregression (VAR) model, to test the causality linkage between Japanese rates and local interest rates and between the US rate and local interest rates. Two distinct features stand out: first, the sensitivity of causality test results is tested under different lag structures along with the choice of optimal lags; second, the methodology developed by Toda and Yamamoto is expected to improve the standard F -statistics in the causality test process. The principle result emerging from the research indicates that the Japanese interest rate has not Grangercaused the movement of interest rates in Singapore but has done so in Australia.

Suggested Citation

  • Jordan Shan & Nick Pappas, 2000. "The relative impacts of Japanese and US interest rates on local interest rates in Australia and Singapore: a Granger causality test," Applied Financial Economics, Taylor & Francis Journals, vol. 10(3), pages 291-298.
    • Handle: RePEc:taf:apfiec:v:10:y:2000:i:3:p:291-298
    DOI: 10.1080/096031000331699
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    References listed on IDEAS

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    1. Lim & C.G. & McNelis & P.D., 1996. "Stock Price Fluctuations in Australia: The Influence of japanese and U.S. Markets," Department of Economics - Working Papers Series 505, The University of Melbourne.
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    Cited by:

    1. Renee Fry, 2002. "International SVAR Factor Modelling," School of Economics and Finance Discussion Papers and Working Papers Series 109, School of Economics and Finance, Queensland University of Technology.
    2. Chan, Tze-Haw, 2002. "Dynamic financial linkages among the Asia Pacific economies: an empirical assessment of real interest parity condition," MPRA Paper 34642, University Library of Munich, Germany.
    3. Koi Nyen Wong & Tuck Cheong Tang, 2010. "Tourism and Openness to Trade in Singapore: Evidence Using Aggregate and Country-Level Data," Tourism Economics, , vol. 16(4), pages 965-980, December.
    4. Peng Yue & Yaodong Fan & Jonathan A. Batten & Wei-Xing Zhou, 2020. "Information transfer between stock market sectors: A comparison between the USA and China," Papers 2004.07612, arXiv.org.

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