Roger Hammersland og Birger Vikøren
Working Paper 1997/10, 34 p. ISSN 0801-2504. ISBN 82-7553-115-2.
The purpose of this paper is to examine empirically the relationship between long-term interest rates in well integrated financial markets. We focus on long-term interest rates in the US and Germany. The analysis has been carried out within the framework of a four dimensional VAR for the simultaneous determination of short- and long-term interest rates in the US and Germany. The results strongly support the existence of a long-run relationship between the long-term German, the long-term US and the short-term German interest rates. The relationship seems to be particularly strong between the two long-term interest rates where a 100 basis point change in the long-term US interest rate leads to a 88 basis point change in the German long-term rate. Moreover, we find that the direction of causality goes from the long-term US to the long-term German interest rate.