International linkage of interest rates Evidence from the emerging economies of Asia Emmanuel Anoruo a, *, Sanjay Ramchander b,1 , Harold F. Thiewes c,2 a Department of Management Science and Economics, Coppin State College, 2500 W. North Avenue, Baltimore, MD 21216, USA b Department of Finance and Real Estate, College of Business, Colorado State University, Fort Collins, CO 80523, USA c Department of Finance, Insurance and Real Estate, 150 Morris Hall, Minnesota State University-Mankato, Mankato, MN 56001, USA Abstract This article employs monthly short-term interest rate data over the 1980 – 1999 period to investigate the intermarket interest rate linkages across seven newly industrialized markets in Asia, and the influence that Japan and the US exert on interest rates in the region. In an attempt to isolate the impact of the liberalization process from the Asian financial crisis on interest rate transmission mechanisms, the sample period is broken down into two equally divided subperiods (1980 through 1989 and 1990 through 1999). The results from the study indicate that (a) the national short-term interest rate nexus is inherently a steady-state, long-run phenomenon, in that they are found to be cointegrated; (b) there is a pronounced increase in the cross-country interest rate linkages during the 1990s; (c) Hong Kong and Singapore play an important, but not dominant, role in the Asian region, and serve to integrate the regional economies and mediate the short-run linkages between the regional and the world financial 1044-0283/02/$ – see front matter D 2002 Elsevier Science Inc. All rights reserved. PII:S1044-0283(02)00046-7 * Corresponding author. Tel.: +1-410-951-3446; fax: +1-410-951-3445. E-mail addresses: eanoruo@coppin.edu (E. Anoruo), sanjay.ramchander@colostate.edu (S. Ramchander), harold.thiewes@mankato.msus.edu (H.F. Thiewes). 1 Tel.: +1-970-491-6681; fax: +1-970-491-7665. 2 Tel.: +1-507-389-5344. Global Finance Journal 13 (2002) 217 – 235