Ling, Tai-Hu and Liew, Venus Khim-Sen and Syed Khalid Wafa, Syed Azizi Wafa (2006): Real interest rates equalization: The case of Malaysia and Singapore.
Download (185Kb) | Preview
This study provides some evidences showing high degree of financial integration from both evidences of common shocks and real interest parity in the context of two small and open economies, that is, Malaysia and Singapore. Few key policy implications may be suggested from the findings in this study. First, foreign investors who invest in these two countries may need to look for sources of diversification to protect their wealth against the occurrence of contagion effect due to the strong trade and finance relationship between these two countries. Second, the banks and businesses that set rules for interest rates on deposits and loans should be kept consistently with commercial banking practices and key developments in the financial sectors for the betterment of both Malaysia and Singapore economies. Third and most importantly, as two financial markets are highly linked, the monetary and fiscal authorities of both countries should work hand-in-hand to avoid any potential macroeconomic instability in this region.
|Item Type:||MPRA Paper|
|Original Title:||Real interest rates equalization: The case of Malaysia and Singapore|
|Keywords:||Real Interest Rate Parity; Malaysia; Singapore|
|Subjects:||F - International Economics > F3 - International Finance > F36 - Financial Aspects of Economic Integration
R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity
|Depositing User:||Venus Khim-Sen Liew|
|Date Deposited:||05. Dec 2006|
|Last Modified:||16. Feb 2013 23:30|
Anoruo, E., S. Ramchander and H.F. Thiewes (2002) “International linkage of interest rates: Evidence from the emerging economies of Asia”, Global Finance Journal 13, 217 – 235.
Ariff, M. and A.M. Khalid (2000) Liberalization, Growth, and the Asian Financial Crisis, Edward Elgar Publishing Limited, UK.
Baharumshah, A.Z., C.T. Haw and S. Fountas (2005) “A panel study on real interest rate parity in East Asian countries: pre- and post-liberalization era”, Global Finance Journal 16, 69-85.
Bekaert, G., C. R. Harvey and R. Lumsdaine (2002a) “Dating the Integration of World Capital Markets”, Journal of Financial Economics 65, 203-249.
Chinn, M.D. and J.A. Frankel (1995) “Who drives real interest rates around the Pacific Rim: the USA or Japan?”, Journal of International Money and Finance 14, 801-821.
Cumby, R. E. and F.S. Mishkin (1986) “The international linkage of real interest rates: the European –US connection”, Journal of International Money and Finance 5, 5–23.
Cumby, R.E. and M. Obsfeld (1984) International interest rate and price level linkages under flexible exchange rates: a review of recent evidence, in J.F.O. Bilson and R.C.
Marston (eds.) Exchange Rate Theory and Practice. NBER, Chicago University Press, Chicago.
Dickey, D.A. and W.A. Fuller (1981) “Likelihood ratio statistics for autoregressive time series with a unit root”, Econometrica 49, 1057-1072.3
Elliott,G., T J. Rothenberg and J.H. Stock (1996) “Efficient Tests for an Autoregressive unit root”, Econometrica, 64, 813-836.
Gagnon, J.E. and M.D. Unferth (1995) “Is there a world real interest rate?”, Journal of International Money and Finance 14, 845 – 855.
Glick, R. (1987) “Interest rate linkages in the Pacific Basin”, FRBSF Economic Review 3, 31 – 42.
Johansen, S. and K. Juselius (1990) “Maximum likelihood estimation and inference on cointegration with applications to the demand for money”, Oxford Bulletin of Economics and Statistics 52, 169-210.
Karfakis, C.J. and D.M. Mochos (1990) “Interest rate linkages within the European Monetary System: a time series analysis”, Journal of Money, Credit, and Banking 22, 388 -394.
Kwiatkowski,D., P.C.B. Phillips, P. Schmidt and y. Shin (1992) “Testing the null hypothesis of stationary against the alternative of a unit root”, Journal of Econometrics 54, 159-178.
Lai, K.S. (1997) “Is the real interest rate unstable? Some new evidence 29, 359-364. Laurenceson, J. (2003) “Economic Integration between China and the ASEAN-5” ASEAN Economic Bulletin” 20, 103 – 111.
Ministry of International Trade and Industry Malaysia, “Malaysia Industry, Investment, Trade and Productivity Performance, Malaysia:” Ministry of International Trade and Industry, 2005.
Mishkin, F. (1984) “Are real interest rates equal across countries? An empirical investigation of international parity conditions”, Journal of Finance 39, 1345 – 1358.
Mishkin, F. (1992) “Is the Fisher effect for real? A reexamination of the relationship between nominal interest rates and inflation using cointegration techniques” Journal of Monetary Economics, 30, 195-215.
Mishkin, F.S. (1981) “The Real Interest Rates: An Empirical Investigation”, Carnegie- Rochester Conference Series on Public Policy 15, 151-200.
Moosa, I.A, and R.H. Bhati (1997) “Are Asian markets integrated? Evidence for six countries vis-à-vis Japan”, International Economic Journal 11, 51 – 67.
Newey, Whitney and Kenneth West (1994) “Automatic Lag Selection in Covariance Matrix Estimation” Review of Economic Studies, 61, 631-653.
Ng, Serena. and Pierre Perron. (2001) “Lag length Selection and the Construction of Unit Root Tests with Good Size and Power” Econometrica, 69(6), 1519-1554.
Osterwald-Lenum, M. (1992) “A note with quantiles of the asymptotic distribution off the maximum likelihood cointegration rank test statistics”, Oxford Bulletin of Economics and Statistics 54, 461-472.
Pill, H, and M. Pradhan (1997) “Financial liberalization in Africa and Asia”, Finance and Development 7-10.
Rasidah and Hawati (2001) “The long-run relationship between nominal interest rates and inflation of the Asian Developing Countries”, Jurnal Ekonomi Malaysia 35, xx-xx.
Rose, A.K. (1988) “Is the Real Interest Stable?”, Journal of Finance 43, 1095-1112.