This thesis is about the causal relationship between interest rates. In chapter 1, with the help of time-series econometrics and by applying linear Granger causality tests based on the Toda-Yamamoto approach, the linear causality directions between the federal funds rate and five different interest rates during the last seven business cycles in the U.S. are investigated. We also examine the linear Granger causality directions between the overnight rate and five other interest rates during the last three business cycles in Canada. In chapter 2, the Diks and Panchenko Granger causality test is applied to explore the nonlinear causality effects between the short-term and long-term interest rates. By combining nonlinear causality effects with the linear ones which are found in the first chapter, it is seen that during the related periods in the U.S. and Canada, the most common Granger causality direction between short-term and long-term interest rates is a bidirectional one. Moreover, our findings show that during recent periods, the federal funds rate and overnight rate Granger cause other interest rates significantly. In chapter 3, the rolling window strategy is employed to detect the linear and nonlinear Granger causality relationship between the federal funds rate and the 10-year government bond rate, during different time horizons, investigating whether these causalities change with the passing of time. Our findings show that during different time horizons, there is a significant two-way Granger causality relationship between these interest rates. Although we have a different interpretation of the existence of bidirectional causation between short-term and long-term interest rates, this conclusion provides some support to some post-Keynesian structuralists viewpoints like Pollin (2008). However, Pollin's claim indicating that with the passing of time the significant causality effects of the federal funds rate to the market rates becomes insignificant is not supported by the current thesis findings because our results demonstrate that these causality effects have not been diminishing over the most recent business cycles.

This thesis is about the causal relationship between interest rates. In chapter 1, with the help of time-series econometrics and by applying linear Granger causality tests based on the Toda-Yamamoto approach, the linear causality directions between the federal funds rate and five different interest rates during the last seven business cycles in the U.S. are investigated. We also examine the linear Granger causality directions between the overnight rate and five other interest rates during the last three business cycles in Canada. In chapter 2, the Diks and Panchenko Granger causality test is applied to explore the nonlinear causality effects between the short-term and long-term interest rates. By combining nonlinear causality effects with the linear ones which are found in the first chapter, it is seen that during the related periods in the U.S. and Canada, the most common Granger causality direction between short-term and long-term interest rates is a bidirectional one. Moreover, our findings show that during recent periods, the federal funds rate and overnight rate Granger cause other interest rates significantly. In chapter 3, the rolling window strategy is employed to detect the linear and nonlinear Granger causality relationship between the federal funds rate and the 10-year government bond rate, during different time horizons, investigating whether these causalities change with the passing of time. Our findings show that during different time horizons, there is a significant two-way Granger causality relationship between these interest rates. Although we have a different interpretation of the existence of bidirectional causation between short-term and long-term interest rates, this conclusion provides some support to some post-Keynesian structuralists viewpoints like Pollin (2008). However, Pollin's claim indicating that with the passing of time the significant causality effects of the federal funds rate to the market rates becomes insignificant is not supported by the current thesis findings because our results demonstrate that these causality effects have not been diminishing over the most recent business cycles.

Since the floating exchange rate regime was set up in 1973, the issue of exchange rate has been concerned not only by corporate organizations but also folks. For multinational corporate institutions, exchange rate plays an important role in their profit. For folks, exchange rate influences the cost of going abroad. What¡¦s more, it is also one of investment tool for making profits. There are many empirical researches attesting that the term structure can forecast economic growth, and the exchange rate can be predicted by economic growth. However, no researches have shown the direct relationship between the term structure and the exchange rate. Therefore, the main purpose of this article is to examine whether the term structure can predict the exchange rate or not, and then to us this result to compare with the empirical result in which many researches claim that the real long term interest rate can predict the exchange rate very well. In the final step, we use the method of out of sample test to examine our model and random work model to make our examination more robust. In conclusion, our empirical research attests that the relationship between the term structure and the exchange rate is significantly negative. This result also shows that the ability of our model¡¦s prediction is better than that of others.

Standard and Poor¡¦s (S & P), a global leading corporation in providing credit rating, published the sovereign rating outlook of Taiwan which was ¡§negative sign¡¨ at the end of 2007. The main reason was that the situation of public finance continued worsening. Based on traditional economic theory, the increased deficits or debts led to higher interest rates, and the increasing burden on enterprises for paying more loan cost, would have more adverse effects on the domestic investment activities. Therefore, this study is intended to explore the relationships among the long-term interest rates of public bonds, the outstanding debts, fiscal deficits, and government expenditure in Taiwan by analyzing 53 seasonal data from 1994:4 to 2007:4 as the samples. The findings indicate that no structure breaking points exist in every variable by using CUSUM test, and almost every variable is integrated of order one in unit root test. The results also reveal that there is no long-term relationship among the deficits, government expenditure, and interest rates using the cointegration analysis. There are probably two reasons for explanation: one is that people will increase saving automatically, and another is that the increased interest rates in the tax cut may be offset by the decreased interest rates in debts financing. Moreover, the outstanding debts and interest rates exist a significant negative relationship of long-term equivalence, and further variance decomposition shows that the effect of debts on interest rates is higher than the effect of interest rates on debts in the variable¡¦s explanatory ability. To explain the significant negative relationship, the possible main causes are liquidity factor, and the psychological anticipation of saving in public bond form directly or indirectly; the secondary cause is the fluctuation of interest rates affects the willingness of government financing.

This paper analyzes what factors influence the long-term interest rate, in order to give an understanding of why the government debt has increased in EU member states. It is a statistical study of panel data analyzed by the fixed effect model. The research of the 27 EU member states is based on secondary data from the European Commission; Eurostat and EconStats. The results by the fixed effect model show that government debt, budget deficit and presidential system are significant and have a positive relationship with the long- term interest rate. The growth rate is significant, having a negative relationship with the long-term interest rate and the financial crisis did not increase the long-term interest rate. The results were not entirely consistent with theories and previous studies.

This diploma thesis describes the Quantitative easing as an unconvetional tool of the monetary policy. In the first chapter of this thesis there is theoretical analysis of the zero lower bound and also of specific phenomenon that might occur in this situation (the liquidity trap). The second chapter deals with the quantitative easing as a monetary policy with focus on the United States. It summarizes its development during three so called rounds, during which the quantitative easing has been used. This chapter also contains analysis of the entrance and exit strategy of the quantitative easing. In the third chapter, there is an econometric model estimated by ordinary least squares method with robust errors. This model is being used to verify the hypothesis whether the quantitative easing lowered long-term interest rates. The hypothesis has been rejected as the quantitative easing does not have statistically significant effect on any selected long-term bonds.

This study will be investigating the relationship between short-term and long-term interest rates with the OMX30 stock return expressed in percentage, as well as the effect that the interest rates have on the stock return. The data used in this study has been collected from the dataprogram Datastream with monthly observations from January 2003 until December 2022 resulting in 240 different variables within all three factors over a period of 20 years. While performing OLS estimation, the result estimated by using R-studio shows a negative correlation between the interest rates and the percentage return of OMX30. Furthermore, the Granger causality test shows that the short-term interest rate does have an impact on the market whilst the long-term interest rate does not have any direct effect on the stock market in Sweden.