Integration of Long-Term Interest Rates: Empirical Evidence for G7 Countries

Abstract

This article investigates the fractional cointegration relationship between long-term interest rates of G7 countries over the period from 1990:01 to 2010:04 by estimating the cointegrating regressions for possible bivariate, trivariate and four-variate subsystems as well as the full system. The obtained results indicate that long-term interest rates are fractionally cointegrated for bivariate subsystems of Canada–France, Canada–Japan and Canada–UK and four-variate subsystem of Canada–USA–France–UK, implying integration.