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Emperical analysis of short-term eurocurrency rates: Evidence from a transfer function error correction model
Journal article   Peer reviewed

Emperical analysis of short-term eurocurrency rates: Evidence from a transfer function error correction model

Thomas C. Chiang and Jeanette Jin Chiang
Journal of economics and business, v 47(4), pp 335-351
1995

Abstract

This paper presents empirical evidence on the short-run dynamics of the six Eurocurrency rates with short-end maturities. Cointegration tests indicate that both the short rate and long rate are cointegrated. Estimations of the “transfer function-error correction model” indicate that both the change of the long-term interest rate and the error-correcting term are highly significant. The evidence shows that the error correction term has longer time lags, indicating that the error correction representation is more accurately specified as a nonlinear model, although the first-order lag is found to be a good approximation.

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