testing the expectations hypothesis of the term structure of interest rates in brics countries: a multivariate co-integration approach

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ID: 144381
2016
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Abstract
The BRICS is a group of major emerging economies in the world which have combined financial resources to form the New Development Bank in an effort to address economic challenges faced by these countries. Thus, the flow of funds among the BRICS countries are expected to increase and this has implication on interest rates changes in these countries. Employing monthly short and long term interest rates from June 2005 to June 2015, this study used a multivariate cointegration approach to test for the validity of the expectations hypothesis (EH) of the term structure of interest rates in BRICS countries. The results of the co-integration analysis revealed that the EH only holds in three of the five countries, namely China, India, and South Africa. Short and long term interest rates for these three countries converge to the long-run equilibrium at different speed, where the convergence was found to be quick in South Africa and slow in China. This study found no evidence of EH in Brazil and Russia. Findings of this study are relevant to current developments within BRICS financial markets and provide valuable information that can be used to forecast future changes in interest rates in BRICS countries.
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muzindutsi2016actatesting Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors ;Paul Francois Muzindutsi;Sinethemba Mposelwa
Journal organic process research and development
Year 2016
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