Abstract
The degree of integration between financial markets has increased substantially in recent years. Casual observation of simple correlations of changes in nominal interest rates, such as those shown in Tables 1 and 2 suggest chat since the mid-1970s co-movements of long-term and to a lesser extent short-term nominal interest rates have tended to increase markedly, particularly during the 1980s and most noticeably amongst countries in the European Monetary System. Moreover, closer study of this question by Obstfeld (1986a, 1986b) have confirmed the basic trends implied by Tables 1 and 2 and cast doubt on an earlier empirical study by Feldstein and Horioka (1980) which suggested indirectly through simple correlations of national savings and investment that capital markets were segmented.1
This paper has appeared in the Finnish Economic Papers and is reprinted with permission from the Finnish Society for Economic Research. We appreciate the comments on a previous version of this paper from several colleagues and from participants of the Helsinki Conference on “Perspectives on Capital Income Taxation in Europe”. Paul Van den Bergh kindly supplied us with the figures shown in Tables 1 and 2. The views expressed in this paper are our own and not necessarily those of the Bank for International Settlements.
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Alworth, J.S., Fritz, W. (1989). Capital Mobility, the Cost of Capital Under Certainty and Effective Tax Rates in Europe. In: Funke, M. (eds) Factors in Business Investment. Microeconomic Studies. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-48748-4_9
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