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

Azadeh Rahimi; Marc Lavoie; Ba Chu

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

Azadeh Rahimi Marc Lavoie ^{1, 2} Ba Chu ³

1 CEPN - Centre d'Economie de l'Université Paris Nord

2 uOttawa - University of Ottawa [Ottawa]

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.

Type de document :

Article dans une revue

Domaine :

Sciences de l'Homme et Société / Economies et finances

Liste complète des métadonnées

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 5 septembre 2019 - 16:47:02

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

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

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