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This paper finds empirical support for a Taylor (1993) type interest rate determination rule. The model is solved analytically, estimated and used for simulation, impulse response analyses and forecasting with quarterly time series data for the UK and annual time series data for Germany, France, Japan, the UK and the US. The results confirm that such rules implicitly exists during the period of analysis. [ABSTRACT FROM AUTHOR]

The Yen-Dollar Agreement between the United States and Japan in 1984 was an epoch-making event in Japanese financial history. In spite of the importance of the Yen-Dollar Agreement for Japanese financial liberalization, there are few empirical studies about its effects. In this paper, we investigate the wealth effects of the Agreement on bank stockholders. Although we expect the negative impact of the intense competition on stockholders' wealth, our empirical results show that the Agreement produced positive wealth effects on bank stockholders. Our results suggest that the benefits of financial liberalization triggered by the Agreement were expected to outweigh the negative effect of the intense competition. This is one of the reasons why the liberalization and internationalization of Japanese financial markets and institutions have been going more smoothly than expected. [ABSTRACT FROM AUTHOR]

This paper investigates short-term interest rate models using daily data for both the US and Japan over the five years October 1989 to January 1994. A nonparametric method is used to estimate the volatility of the short-term interest rate and the results are compared with those from a parametric method. Three important features are found. First, a two-factor model can capture the behaviour of the interest rate better than a one-factor model. Second, although the US interest rate does not exhibit the mean reverting property, the Japanese interest rate does. Third, in contrast to the Japanese interest rate, the conditional variance of US interest rate changes is found to depend on the level of the interest rate. [ABSTRACT FROM AUTHOR]

This paper develops a theoretical framework which allows for both domestic and external factors in the determination of interest rates. We argue that if capital controls are imposed, or if the risk premium is a function of disequilibria in the money market, domestic factors should also play a role. We assess empirically the role of both domestic monetary conditions and open economy factors in the US, Japan and Germany, France and Switzerland. Our results suggest the following. Concerning external factors, monetary policy in Germany affects significantly both US and Japanese interest rates; Germany, on the other hand, is rather responsive to developments in continental Europe, in spite of its 'dominance' of the EMS. As for domestic influences, inflationary expectations are an important factor in explaining interest rate behaviour in Japan, and the budget deficit plays a role in the US. Also, the US monetary authorities adopt a more accommodating policy than the Bundesbank. [ABSTRACT FROM AUTHOR]

The Lintner model of aggregate corporate dividend pay-out behaviour is applied to firms in the private sector in a developing country, India. The findings are that an augmented Lintner model which includes external finance as an explanatory variable explains aggregate dividends better. Possible reasons for this finding are discussed both in the context of India and developing countries in general. Finally, the paper tests to see whether dividend pay-out behaviour can be characterized as rational. While it appears that dividend pay-out behaviour is not rational, which is contrary to recent evidence from the US and Japan, a deeper understanding of the institutional environment in which firms operate suggests that when viewed in that context the observed irrationality may indeed be rational. [ABSTRACT FROM AUTHOR]

Within the framework of a standard discounted value model, we examine whether a number of macroeconomic variables influence stock prices in the US and Japan. A cointegration analysis is applied in order to model the long-term relationship between industrial production, the consumer price index, money supply, long-term interest rates and stock prices in the US and Japan. For the US, we find the data are consistent with a single cointegrating vector, where stock prices are positively related to industrial production and negatively related to both the consumer price index and the long-term interest rate. We also find an insignificant (although positive) relationship between the US stock prices and the money supply. However, for the Japanese data, we find two cointegrating vectors. We find for one vector that stock prices are influenced positively by industrial production and negatively by the money supply. For the second cointegrating vector, we find industrial production to be negatively influenced by the consumer price index and a long-term interest rate. These contrasting results may be due to the slump in the Japanese economy during the 1990s and consequent liquidity trap. [ABSTRACT FROM AUTHOR]

This article analyses volatility transmission across the swap markets of the US, Japan and the UK. The two-step procedure developed by Cheung and Ng (1996) is used to examine causality-in-mean and causality-in-variance among the three countries. The empirical findings indicate the existence of more causality-in-variance patterns during the time of financial crisis than in the normal period that preceded it. [ABSTRACT FROM AUTHOR]

This article examines the impact of the 2007-2009 Global Financial Crisis on the interrelationships among global stock markets and the informational role of the TED spread as perceived credit risk. The current crisis originated from the dominant US market has a prompt and pervasive spillover effect into other global markets. Using the Vector Autoregressive (VAR) model, Granger causality test, cointegrating Vector Error Correction Model (VECM), we document enhanced leadership of the US market with respect to UK, Hong Kong, Japan, Australia, Russia and China markets during the crisis. Consistent with the contagion theory, the interdependence among international stock markets becomes stronger in the crisis. The TED spread serves as a leading 'fear' indicator and adjusts to new information rapidly during the crisis. While the impact of orthogonalized shocks from the US market on other global markets increases by at least two times during the crisis, the impact of orthogonalized shocks from the TED spread on global market indices increase by at least five times. Overall, these findings shed light on the dynamics of international stock market linkage and the spillover effect of credit risk. [ABSTRACT FROM AUTHOR]

By using the time series of US and Japanese equity indexes, this article finds that the contemporaneous transmission from the US to Japanese equities markets is a significant 0.1387, while from Japan to the US it is 0.0165 and is not significant. This means that a 1% increase in the US market is estimated to have a positive 13 basis point increase on the Japanese market. The estimated results obtained in this article imply that Japanese investors react to US information significantly but US investors do not react to Japanese information significantly. To obtain these results, we identified a structural vector autoregression using identification through heteroscedasticity introduced by Rigobon (2003a). This article contributes to the literature by estimating and testing the previously inestimable contemporaneous US to Japanese market transmissions. [ABSTRACT FROM AUTHOR]

Although the extreme tails of the distributions of equity returns tend to exhibit more negative than positive returns, very few studies have analysed how pervasive is skewness across entire distributions. We use daily returns on 6 international stock market indices from Britain, France, Germany, Italy, Japan and the United States over 24 years from January 1978 to February 2002 to search for skewness in the tails, in different intervals, and in the entire distributions using binomial distribution tests and two distribution free tests, the Wilcoxon Rank Sum Test and the Siegel-Tukey test. We find limited evidence of asymmetry in the tails, with more asymmetry close to the means. However, we find that the asymmetries closer to the means are statistically significant and consistent in a way that the asymmetry in the tails is not. We show via a Monte Carlo study that the Wilcoxon Rank Sum and Binomial Distribution test have good power inferring that the data are independent and identically distributed. [ABSTRACT FROM AUTHOR]

This study employs cointegration analysis to examine the long-run relationships in Prime and CD rates across the US, Canada, Japan, Germany, France and the UK. The nature and strength of the results are found to be contingent on the time periods investigated. While we are unable to reject the null hypothesis of noncointegration for the January 1972-December 1979 interval, there is substantial evidence of cointegration for the more recent January 1980-October 1989 interval. These results are indicative of a pattern of increasing integration among the international bank lending and borrowing markets, coinciding with the trend towards the globalization of banking activity. The evidence from the error correction model suggests that the US and Germany are the dominant countries in the bank lending and borrowing markets. The Prime and CD rates for these countries are seen to cause (in the Granger sense) the rates of other countries. [ABSTRACT FROM AUTHOR]