Monetary policy implications of volatility linkages among long-term interest rates |
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Authors: | Nikiforos T Laopodis |
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Institution: | (1) Business Administration Division, Villa Julie College, Greenspring Valley Road, 21153 Stevenson, MD |
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Abstract: | This paper investigates the implications for monetary policy from the increasing integration of capital markets using interest
rates. The methodology is a multivariate EGARCH model, which captures the spillover mechanism across markets. The results
indicate that since 1990 there have been stronger volatility linkages among markets. Evidence that globalization has influenced
the behavior of interest rates is suggested from the way disturbances in a market spill over to other markets, thereby affecting
the monetary policy conduct in all markets. As investors now have more information about global bonds, their concerted actions
generate more volatility as they continuously rebalance their portfolios. |
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Keywords: | |
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