Are Australian and New Zealand Markets Integrated? Evidence from RIP Tests

Are Australian and New Zealand Markets Integrated? Evidence from RIP Tests

This paper presents some empirical evidence, based on testing real interest panty, supporting the proposition that the implementation of CER and the deregulation of financial markets have contributed to achieving a higher degree of integration between goods and financial markets in Australia and New Zealand. The evidence is derived from a finding of real interest linkages in the post-CER period. Although perfect integration, as implied by a strict equality of real interest rates, is far from being the case, there is some indication that CER and the liberalization of financial markets have enhanced the move in this direction.