Offshore Money Market Interest Rate Transmission among Taiwan, Singapore, and the United Kingdom

Abstract

This study investigates the international interest rate transmission in offshore markets and national markets with the emphasis on Taiwan to scrutinize its internationalization process over the past two decades. Strong cointegration evidence on both overnight and 1-month maturities support the hypothesis that three offshore markets, Taiwan, Singapore, and London, can be considered as one integrated market in the context of information transmission mechanism. However, the hypothesis that term structures within the same economic environment may posses a cointegrating structure cannot found support in Taiwan. In addition, both London and Singapore offshore markets reveal stronger connections with the U.S. domestic market. However, Taiwan is more closely linked to Singapore rather than to the U.S.