THE US DOLLAR IN GLOBAL MONEY MARKETS - A MULTIVARIATE COINTEGRATION ANALYSIS

This study extends the money market integration literature in two ways . First, it analyzes dollar yield behavior within a multivariate coint egration framework as opposed to the usual bilateral approach based on stock adjustment models or Granger/Sims causality test variants. Seco nd, the relationships between dollar yields in four different geograph ic markets-domestic U.S. (New York), Eurodollar (London), Singapore an d Hong Kong-are analyzed, providing a more global perspective than ear lier studies. The results indicate that: (1) simple autoregressive mod els are inadequate for studying interest rate relationships because th e series are cointegrated; and (2) bivariate analysis of money market time series may yield misleading results.