Linear and nonlinear Granger causality between short-term and long-term interest rates during business cycles

Abstract : This paper is about the causal relationship between short-term and long-term interest rates in the U.S. and Canada. To that end, we apply a linear Granger causality test introduced by Toda-Yamamoto (1995) and the nonlinear Granger causality test of Diks and Panchenko (2006). By combining linear causality effects with the nonlinear ones, it is seen that the most common Granger causality direction between short-term and long-term interest rates is a bidirectional one. We also find that nonlinear Granger causality can be found where no linear causality had been uncovered. Moreover, our findings show that during recent business cycles, the federal funds rate (in the U.S.) and the overnight rate (in Canada) still Granger-cause long-term interest rates significantly.
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Article dans une revue
International Review of Applied Economics, Taylor & Francis (Routledge), 2016, 30 (6), (in press)
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https://hal-univ-paris13.archives-ouvertes.fr/hal-01343734
Contributeur : Pascal Seppecher <>
Soumis le : samedi 9 juillet 2016 - 15:38:15
Dernière modification le : jeudi 11 janvier 2018 - 06:23:32

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  • HAL Id : hal-01343734, version 1

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Azadeh Rahimi, Marc Lavoie, Ba Chu. Linear and nonlinear Granger causality between short-term and long-term interest rates during business cycles. International Review of Applied Economics, Taylor & Francis (Routledge), 2016, 30 (6), (in press). 〈hal-01343734〉

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