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RIP and the shift toward a monetary union: Looking for a "euro effect" by a structural break analysis with panel data

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  • Maveyraud-Tricoire, Samuel
  • Rous, Philippe

Abstract

This paper aims to evaluate how the ex ante real interest rates of Euro area countries have been modified by the introduction of the euro. We use cointegration analysis with endogenous breaks in a panel data context. Our results show that the "euro effect" is significant in our sample and that after the introduction of the euro, the real interest parity (RIP) holds. This last conclusion is due to a decrease in the nominal interest rate differentials rather than to a reduction in goods and services price differentials and in the exchange rate volatility.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

Volume (Year): 19 (2009)
Issue (Month): 2 (April)
Pages: 336-350

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Handle: RePEc:eee:intfin:v:19:y:2009:i:2:p:336-350

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Web page: http://www.elsevier.com/locate/intfin

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Keywords: RIP European integration Panel data;

References

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Cited by:
  1. Schmidt, Christoph M & Weigert, Benjamin, 2013. "Weathering the crisis and beyond: Perspectives for the Euro Area," CEPR Discussion Papers 9414, C.E.P.R. Discussion Papers.
  2. Baharumshah, Ahmad Zubaidi & Soon, Siew-Voon & Boršič, Darja, 2013. "Real interest parity in Central and Eastern European countries: Evidence on integration into EU and the US markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 25(C), pages 163-180.

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