The international transmission of eurodollar and US interest rates: A cointegration analysis
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Citation of Original Publication
Fung, H.-G., & Isberg, S. C. (January 01, 1992). The international transmission of eurodollar and US interest rates: A cointegration analysis. Journal of Banking and Finance, 16, 4, 757-769.
The relationship between US and Eurodollar certificate of deposit (CD) rates for the period 1981–1988 is examined using an error correction model. Results indicate that there is a structural change in the CD rates. In the earlier sub-period (1981–1983), there exists unidirectional causality leading from the domestic to the external markets. In the more recent sub-period (1984–1988), however, significant reverse causality is observed. These results are likely due to expansion in the size of the Eurodollar market and an increase in the volume of Eurodollar futures trading.