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International linkages in bank lending and borrowing markets: evidence from six industrialized countries

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  • Arjun Chatrath
  • Sanjay Ramachander
  • Frank Song

Abstract

This study employs cointegration analysis to examine the long-run relationships in Prime and CD rates across the US, Canada, Japan, Germany, France and the UK. The nature and strength of the results are found to be contingent on the time periods investigated. While we are unable to reject the null hypothesis of noncointegration for the January 1972-December 1979 interval, there is substantial evidence of cointegration for the more recent January 1980-October 1989 interval. These results are indicative of a pattern of increasing integration among the international bank lending and borrowing markets, coinciding with the trend towards the globalization of banking activity. The evidence from the error correction model suggests that the US and Germany are the dominant countries in the bank lending and borrowing markets. The Prime and CD rates for these countries are seen to cause (in the Granger sense) the rates of other countries.

Suggested Citation

  • Arjun Chatrath & Sanjay Ramachander & Frank Song, 1997. "International linkages in bank lending and borrowing markets: evidence from six industrialized countries," Applied Financial Economics, Taylor & Francis Journals, vol. 7(4), pages 403-411.
    • Handle: RePEc:taf:apfiec:v:7:y:1997:i:4:p:403-411
    DOI: 10.1080/096031097333510
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    References listed on IDEAS

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    1. Mark Gertler & Simon Gilchrist, 1993. "The role of credit market imperfections in the monetary transmission mechanism: arguments and evidence," Finance and Economics Discussion Series 93-5, Board of Governors of the Federal Reserve System (U.S.).
    2. repec:bla:scandj:v:95:y:1993:i:1:p:43-64 is not listed on IDEAS
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    Cited by:

    1. Mark A. Thompson, 2006. "Asymmetric adjustment in the prime lending–deposit rate spread," Review of Financial Economics, John Wiley & Sons, vol. 15(4), pages 323-329.
    2. Hammoudeh, Shawkat & Chen, Li-Hsueh & Yuan, Yuan, 2011. "Asymmetric convergence and risk shift in the TED spreads," The North American Journal of Economics and Finance, Elsevier, vol. 22(3), pages 277-297.
    3. Heejoon Kang, 1999. "The Applied Cointegration Analysis for the Open Economy: A Critical Review," Open Economies Review, Springer, vol. 10(3), pages 325-346, July.
    4. Thompson, Mark A., 2006. "Asymmetric adjustment in the prime lending-deposit rate spread," Review of Financial Economics, Elsevier, vol. 15(4), pages 323-329.

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