Testing for causality in the transmission of Eurodollar and US interest rates

• Autores: Richard A. Ajayi, A. Serletis
• Localización: Applied financial economics, ISSN 0960-3107, Vol. 19, Nº. 4-6, 2009, págs. 439-443
• Idioma: inglés
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• Resumen

  • This article employs linear Granger causality tests and the nonlinear causality test of Baek and Brock (1992) and Hiemstra and Jones (1994), as recently modified by Diks and Panchenko (2005b), to re-examine the dynamic relation between daily Eurodollar and US certificate of deposit interest rates during the period 4 January 1971 to 15 July 2005. Although we find significant linear causality only from the US certificate of deposit interest rates to the Eurodollar interest rates, we find significant bidirectional nonlinear causality between Eurodollar and US certificate of deposit interest rates.