International financial market integration and linkages of national interest rates

This article finds that even in the 1980's, when barriers to international capital mobility had been largely eliminated, there was no measurable tendency for real interest rates between the U.S. and the major industrial countries to converge. Moreover, the estimated short-run responses of both short-term and long-term interest rates to one another have been exceedingly weak. As a consequence, it appears that U.S. and foreign central banks have been able to influence their domestic interest rates quite independently from the influence of interest rates abroad, despite a high degree of international capital mobility.