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Linkages among US Interest Rates and East Asian Purchases of US Treasury Securities

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  • Dene Hurley

Abstract

Recent increases in East Asian purchases of US treasury securities has led to growing concern over its impact on the US economy, particularly on the US long-term and short-term interest rates. The vector error-correction model results revealed the presence of long-run causal relations among the federal funds rate, the 10-year Treasury rate and the East Asian demand in addition to a unidirectional short-run causal relation from the 10-year rate to the Federal funds rate. The variance decomposition and impulse response findings indicated that the Asian demand for US assets has a limited but negative impact on the 10-year US Treasury interest rate. The transmission of the East Asian demand shock on both interest rates was almost immediate. The Federal funds rate is found to have a significant negative impact on the long-term rate.

Suggested Citation

  • Dene Hurley, 2009. "Linkages among US Interest Rates and East Asian Purchases of US Treasury Securities," Global Economic Review, Taylor & Francis Journals, vol. 38(4), pages 397-408.
    • Handle: RePEc:taf:glecrv:v:38:y:2009:i:4:p:397-408
    DOI: 10.1080/12265080903391800
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    References listed on IDEAS

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    1. Yuko Hashimoto, 2008. "Too Much for Self-Insurance? Asian Foreign Reserves," Working Papers 062008, Hong Kong Institute for Monetary Research.
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    Cited by:

    1. Zhuang, Yangyang & Zhang, Ditian & Tang, Pan & Peng, Hongjuan, 2024. "Clustering effects and evolution of the global major 10-year government bond market structure: A network perspective," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).

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