An analysis of the relationship between international bond markets

Quarterly Bulletin 2001 Q1
Published on 01 March 2001

By Andrew Clare and Ilias Lekkos

This paper focuses on the relationship between international capital markets, in particular government bond markets, in response to a concern that the apparent growing globalisation of capital markets might limit the influence of monetary authorities over their domestic economies, especially in times of financial market crisis. We attempt to gauge: the amount of influence that monetary authorities can have on the shape of the yield curve via changes in short rates; the extent (in terms of duration and magnitude) to which the slope of the yield curve is influenced by international factors during periods of financial crisis; and, finally, by how much co-movements in long bond rates, or indeed the components of these co-movements, change during periods of financial market stress.

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