The stability of government bond markets’ equilibrium and the interdependence of lending rates

Research output: Contribution to journalArticleResearchpeer review

Authors

  • Paulo M.M. Rodrigues
  • Philipp Sibbertsen
  • Michelle Voges

External Research Organisations

  • Banco de Portugal
  • Universidade Nova de Lisboa
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Details

Original languageEnglish
Number of pages36
JournalEmpirical economics
Early online date12 Jun 2024
Publication statusE-pub ahead of print - 12 Jun 2024

Abstract

In this paper, we introduce test procedures for no fractional cointegration against possible breaks to a fractional cointegrating relationship in a segment of the data. We base the proposed tests on the supremum of the Hassler and Breitung (Econom Theor 22(6):1091–1111, 2006) test statistic for no cointegration over possible breakpoints in the long-run equilibrium. We show that the new tests correctly standardized converge to the supremum of a Chi-squared distribution and that this convergence is uniform. An in-depth Monte Carlo analysis provides results on the finite sample performance of our tests. We then use the new procedures to investigate whether there was a dissolution of fractional cointegrating relationships between the yields of government bonds of eleven EMU countries (Spain, Italy, Portugal, Ireland, Greece, Belgium, Austria, Finland, the Netherlands, Germany and France) as a consequence of the European debt crisis and to understand the degree of interdependence of lending rates to non-financial corporations across these eleven countries.

Keywords

    C12, C32, Changing long-run equilibrium, Fractional cointegration, Hassler–Breitung test, Persistence breaks

ASJC Scopus subject areas

Cite this

The stability of government bond markets’ equilibrium and the interdependence of lending rates. / Rodrigues, Paulo M.M.; Sibbertsen, Philipp; Voges, Michelle.
In: Empirical economics, 12.06.2024.

Research output: Contribution to journalArticleResearchpeer review

Rodrigues PMM, Sibbertsen P, Voges M. The stability of government bond markets’ equilibrium and the interdependence of lending rates. Empirical economics. 2024 Jun 12. Epub 2024 Jun 12. doi: 10.1007/s00181-024-02623-x
Rodrigues, Paulo M.M. ; Sibbertsen, Philipp ; Voges, Michelle. / The stability of government bond markets’ equilibrium and the interdependence of lending rates. In: Empirical economics. 2024.
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