Financial flows, global interest rates, and political integration

Jun Nagayasu

doi:10.1016/j.frl.2018.11.021

Financial flows, global interest rates, and political integration

Jun Nagayasu

EEF - Economics and Management

Research output: Contribution to journal › Article › peer-review

1 Citation (Scopus)

Abstract

This paper empirically analyzes international financial flows using data from 2000 to 2016. Using a factor model to calculate a proxy for global interest rates, we confirm that national real interest rates include global elements, particularly those of advanced countries. Thus, interest rate differentials have no significant influence on the financial flows of advanced countries. On the other hand, we find that exchange rates and political integration more consistently influence investment decisions on forming financial portfolios than interest rates.

Original language	English
Pages (from-to)	313-320
Number of pages	8
Journal	Finance Research Letters
Volume	31
DOIs	https://doi.org/10.1016/j.frl.2018.11.021
Publication status	Published - 2019 Dec

Keywords

Financial flows
Global interest rate
Uncovered interest rate parity

ASJC Scopus subject areas

Finance

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title = "Financial flows, global interest rates, and political integration",

abstract = "This paper empirically analyzes international financial flows using data from 2000 to 2016. Using a factor model to calculate a proxy for global interest rates, we confirm that national real interest rates include global elements, particularly those of advanced countries. Thus, interest rate differentials have no significant influence on the financial flows of advanced countries. On the other hand, we find that exchange rates and political integration more consistently influence investment decisions on forming financial portfolios than interest rates.",

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AB - This paper empirically analyzes international financial flows using data from 2000 to 2016. Using a factor model to calculate a proxy for global interest rates, we confirm that national real interest rates include global elements, particularly those of advanced countries. Thus, interest rate differentials have no significant influence on the financial flows of advanced countries. On the other hand, we find that exchange rates and political integration more consistently influence investment decisions on forming financial portfolios than interest rates.

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KW - Uncovered interest rate parity

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