پیامدهای سیاست های پولی از حرکت مشارکتی تقریبی نرخ بهره بلند مدت

This paper examines the monetary policy implications from the greater integration of major capital markets using long-term interest rates. Proof that globalization has affected the behavior of interest rates and made them more synchronized across countries is provided from the way disturbances in a market transmit to other markets thereby affecting the conduct of monetary policy in all involved parties. The results also confirm greater convergence among countries in the European Union (EU) as Germany still retains its hegemonic status. The implications for monetary policy are that countries now will have to deal with more outside shocks and these shocks will be more diverse, intense and persistent. Thus, global monetary policy, at least among the major capital markets, henceforth will have to be played interactively, which may necessitate a greater financial supervision in order to ensure continued world stability and prosperity.

Recent developments in the bond markets have raised serious concerns about the relationships among national long-term interest rates in globalized markets. For instance, since the 1990s long-term interest rates in major economies have moved together very closely despite different economic policies and business cycles by those countries (e.g. Friedmann and Herrmann, 1989, Nambara and Fukao, 1989 and Laopodis, 2000). Hence, it is suggested that interest rates have responded more to external factors than to domestic fundamentals and this might impair significantly the ability of monetary authorities to influence them much more than originally believed. Furthermore, the internationalization of financial markets has significantly changed the breadth and depth of the conduct of monetary policy. Specifically, although it has not changed the main objective of monetary policy (i.e. price level stability), it amplified the scope of real or nominal shocks that must be considered when applying domestic stabilization policies and impacted upon the policy transmission channels. Recent adverse developments in the Asian markets highlight this challenge since policymakers must now evaluate these new dangers and adjust monetary policies accordingly so as to avoid a serious economic exposure at home. Secondly, given that global financial integration means diminished ability of policy makers to pursue domestic stabilization policies independently, a country’s pledge to a pegged exchange-rate regime, under free capital flows, could produce economic malaise at home. Under a fixed exchange-rate regime, market integration means a high degree of convergence of (short- and) long-term interest rates and a greater synchronization in their movements over time. This implies that interest rates are not determined by a single country but by all parties in unison, such as in the European Monetary System (EMS), generating thus a limited scope for independent monetary policy by any individual country. By contrast, under flexible exchange rates (short- and) long-term interest rates are primarily determined by domestic conditions and monetary authorities retain their ability to influence the long-term rates. And third, knowledge of the linkages among national interest rates is important because the understanding of the extent to which interest rates in countries vary in relation to each other has serious practical implications for investors, who rely on international claims contingent on an interest rate in their search for a suitable pricing model, and policy-makers alike, who shape and evaluate regulatory proposals. The above observations solicit several interesting questions regarding the effects of the relations among national interest rates. For example to what degree have the responses among long-term interest rates changed over time and to what extent have external disturbances to long-term interest rates affected the domestic long-term interest rates, given their traditional linkages? This issue is critical for countries, such as Germany, where long-term interest rates are especially important to monetary transmission within EMS. Moreover, turning to the future, better knowledge of the monetary transmission mechanism can (hopefully) provide some indication of the impact of the European Monetary Union (EMU) on the economies of prospective members. Also, has the volatility spillover mechanism manifested itself in a conditional (i.e. shock-specific) or in a general basis? Alternatively put, has there been a general increase in the tendency for interest rate changes in a major bond market to transmit to bond markets in other countries on a near term basis such as a week? This question seeks to find evidence of what is called ‘shock contagion’ among major capital markets. Lastly, has the ability of national central banks to implement monetary policy been increasingly constrained, given the prevalent perception of the market that interest-rate linkages have become more intense over the years? The extant evidence on these questions suggests that, in general, there exists a greater co-movement among major long-term interest rates (e.g. Friedmann and Herrmann, 1989 and Christiansen and Pigott, 1997). During much of the 1980s, for instance, periods of unusually high volatility have been observed to cluster across the major capital markets (e.g. Borio and McCauley, 1996). Furthermore, there is strong (and statistically significant) evidence that movements in one bond market help predict future movements in other markets (see for instance, Remolona, 1991). For example several studies point out that the US bond rates are a significant source of information for bond rates in several European countries (and particularly in Germany) as well as in Japan (see Friedmann and Herrmann, 1989 for Germany, Christiansen and Pigott, 1997 for other European countries and Nambara and Fukao, 1989 for Japan). This study employs the vector autoregressive (VAR) methodology to investigate the simultaneous volatility linkages of the long-term interest rates of eight major countries namely, Canada, France, Germany, Japan, The Netherlands, Switzerland, the UK and the US. The attractiveness of the VAR approach stems from its simplicity and the need to impose few restrictions to obtain the estimated parameters. The approach followed here is novel in several ways. First, it allows us to analyze the volatility transmission channel based exclusively upon the shocks generated concurrently in other markets on a multilateral rather than on a bilateral basis. This should also provide information on the degree of integration of the world capital markets. Second, we include in our sample countries that have not been examined in the literature as part of a globalized capital market. Besides, in light of the present realization of the EMU, is useful to examine their role and see if they are active information producers or merely passive information receivers. In conjunction with the above, we test whether the ‘German leadership’ hypothesis still holds within the EMS. And third, the insights from the empirical analysis will be evaluated in terms of the future conduct of global monetary policy. Consequently, if these markets are well-integrated and well-functioning then national interest rates should be tied to a world market interest rate which would considerably weaken the ability of governments to pursue independent economic policies. The rest of the paper is organized as follows: Section 2 discusses the data sources and reports some preliminary statistical results involving sample correlations, stationarity issues and cointegration tests; Section 3 deals with the methodological design of the study; Section 4 presents and discusses the empirical findings as well as their implications, from the perspective of the monetary transmission mechanism and, lastly, Section 5 summarizes the study and concludes with some general remarks.

This paper investigates the implications for monetary policy from the greater integration of major capital markets since 1980 via the use of long-term interest rates. The empirical approach is a vector autoregression, which examines the nature of the monetary spillover mechanism across eight markets namely, Canada, France, Germany, Japan, The Netherlands, Switzerland, the UK and the US. The error forecast decomposition results show that since the 1990s the linkages among major bond markets became stronger. Proof that globalization has seriously affected the behavior of interest rates and made them more synchronized across countries is suggested from the way disturbances in a major market transmit to other markets. These are usually fast and persistent, as illustrated by the impulse response functions, and will surely affect the conduct of monetary policy in all involved parties. Additionally, the findings confirm greater convergence among countries within the European Union with Germany still retaining its hegemonic status. The broad implications for the global monetary policy are that countries now will have to deal with more outside shocks and these shocks will be more diverse and persistent. This connotes that a given country’s ability to influence its domestic interest rate will be severely impaired especially when that country loses the benefit of using a cushioning mechanism (such as the exchange rate in the case of the EU countries) against these disturbances. Besides, despite greater economic integration, all countries are not highly homogeneous, as is still the case within the EU, so as to adequately and/or effectively mitigate the effects of foreign disturbances. Thus, global monetary policy, at least among the major capital markets, will have to be played interactively henceforth which may necessitate greater financial supervision and regulation to ensure continued world stability and prosperity.