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Global markets have become more integrated, making co-movements of international interest rates possible. In this paper, we investigate the causal linkage between US and Eurodollar (London) interest rate using the Granger causality test in quantiles. This permits us to examine causality over interest rate distributions not covered by the usual causality test. We therefore test causality in different quantile ranges. A common attribute with previous studies that investigate the causal linkages among interest rates across international money markets is the assumption that the causal relations between international interest rate changes are constant across different interest rate levels. In this study, we allow for asymmetric quantile causal effects. Our empirical results suggest a quantile causal effect between US interest rate and Eurodollar interest rate. US interest rate Granger cause Eurodollar interest rate. The effect is positive at lower quantiles and negative at upper quantiles. On the other hand, Eurodollar interest rate Granger cause US interest rate, but the effect is negative at the lower quantile and positive at the upper quantile. The estimated causality coefficients at both the lower and the higher quantiles are significantly different from the median coefficients.

This study investigates the effects of foreign trade (economic openness) on South African economic growth. We control for the role of human capital accumulation, physical capital and foreign direct...

This study tests the ripple effects, long-run convergence, and dynamic correlation structures of swap spreads of varying maturities. The study employs the ARDL bounds-testing approach and the asymmetric DCC methodology on daily data spanning 15 years. The results largely support the presence of the ripple effect and the long-run convergence of swap spreads of differing maturities. However, there are significant variations in the strength and speed of adjustment towards long-run equilibrium relationship among diverse maturities. Most pairs of swap spreads exhibit strong, symmetric, highly persistent, and time-varying dynamic co-movements, suggesting interdependence and information flow among the swap spreads of varied maturities.

This study explores two main issues. One: How do the exchange rate and inflation rate impact long term dependency structure of weekly returns of seven African stock markets? Two: What is the long term dependency structure of stock returns and variance in the absence and in the presence of structural breaks? The sample period is 06-2002 through 02-2014. The returns are de-thinned to account for illiquidity of stock returns. The study implements sequential multiple structural breaks test to identify structural breaks. Three semi-parametric tests and three parametric methods are then implemented to test for the long memory behavior of raw returns and break-adjusted returns. The long memory estimates decline monotonically in magnitude or in statistical significance as returns are adjusted for exchange rate and then inflation rate. There is evidence of multiple structural shifts whose break dates correspond to major domestic or global events. Without structural breaks, the results indicate the existence of long memory components in returns and variance. Using the break-adjusted returns, the long memory evidence in returns and variance weakens in magnitude and/or statistical significance or just dissipates in some ASMs. The absence of long memory using break-adjusted returns suggests that long memory may be an artifact of short memory encountering breaks in some ASMs. Caution is therefore warranted when interpreting long memory inferences in the presence of structural breaks and making policy recommendations. Our evidence is useful to investors, fund managers and policy makers.

Purpose The purpose of this paper is to examine the effect of specialization of the securitized assets portfolio on banks’ performance and securitization risk. In doing so, the paper addresses two important issues. First, whether the efficient risk–return trade-off for securitized asset portfolios is consistent with the principles of diversification. Second, whether the relationship between bank-level returns and securitized assets portfolio specialization is non-linear in securitization risk. Design/methodology/approach This paper used the fixed-effects panel regression model on US bank holding company data for the period 2001:Q2 to 2014:Q1. Findings The results show that securitized assets portfolio specialization increases returns and also reduces securitization default risk; banks’ return and securitized assets specialization are dependent in a non-linear manner on banks’ securitization risk. Additionally, it was also found that lower bank performance leads to higher securitization risk. Originality/value This paper is of value by demonstrating that diversification (specialization) of securitized assets portfolio would achieve better bank performance in low-risk (high-risk) scenarios.

We examine whether stock prices in 18 emerging markets follow random-walk or mean-reversion processes in the presence of sudden and gradual multiple structural breaks. Our tests endogenously determined the structural shifts and are more powerful than either the traditional random-walk (unit root) tests or the single structural break tests. In all emerging markets, we find strong evidence for multiple structural breaks. When we use single break tests, the random-walk hypothesis is rejected. However, when we use tests of double level shifts in the mean and make due allowance for multiple structural breaks, the results are consistent with the random-walk hypothesis in the vast majority of the sampled markets. The evidence proves robust to using price indexes whether denominated in U.S. dollars, in local currencies or in real terms, and also to using fractional integration tests. Our results contradict some previous studies for emerging markets which restrict structural breaks to only one-time shift.

This study examines the effect of securitisation on the loan portfolio, investigating its impact on bank loan specialisation. Using US bank holding company data from 2001: Q2 to 2014: Q1, I find a positive relation between securitisation and bank loan specialisation, driven primarily by securitised mortgages. This study in addition examines securitisation's effect on the negative relationship (as observed in previous studies) between loan specialisation and bank risk, finding that within the period of our studies, securitisation weakens that relationship. Such results suggest that within the focus period of this study, mortgage backed securitisation in particular resulted in an overall specialisation of credit, in ways that weakens the risk benefit associated with loan specialisation.

Research continues to investigate the relative efficacy of monetary and fiscal policies for stabilizing the US economy, a debate that began with Anderson and Jordan’s well-known study. This paper examines the contention of Senbet that monetary policy matters for stabilizing real economic activities; fiscal policy does not. We show that this claim is unfounded and apparently the outcome of prematurely dismissing fiscal policy from the cointegrating vector. In the context of a properly specified model, results we obtained from cointegration and error-correction tests using data and time period similar to Senbet’s consistently suggest that only fiscal policy Granger-causes real output over the long-run. Moreover both monetary and fiscal actions Granger-cause significant short-run effects on the real side of the economy.