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Interest rate causality and asymmetry in the EMS

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  • Karsten Biltoft
  • Christian Boersch
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    Abstract

    This paper investigates the hypothesis of an asymmetric EMS under German leadership in the period from 1983 to 1991. The approach adopted was to undertake Granger-causality tests on daily observations of changes in interest rates. For the group of core countries we find that, in recent years, the EMS has operated asymmetrically. This asymmetry has developed over the years and was not evident prior to 1987. Copyright Kluwer Academic Publishers 1992

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    File URL: http://hdl.handle.net/10.1007/BF01886154
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    Bibliographic Info

    Article provided by Springer in its journal Open Economies Review.

    Volume (Year): 3 (1992)
    Issue (Month): 3 (October)
    Pages: 297-306

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    Handle: RePEc:kap:openec:v:3:y:1992:i:3:p:297-306

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    Web page: http://www.springerlink.com/link.asp?id=100323

    Related research

    Keywords: EMS; asymmetry; Granger-causality;

    References

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    1. Michele Fratianni & Juergen Hagen, 1990. "German dominance in the EMS," Open Economies Review, Springer, vol. 1(1), pages 67-87, February.
    2. Giavazzi, Francesco & Pagano, Marco, 1988. "The advantage of tying one's hands : EMS discipline and Central Bank credibility," European Economic Review, Elsevier, vol. 32(5), pages 1055-1075, June.
    3. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    4. Mélitz, Jacques, 1988. "Monetary Discipline and Cooperation in the European Monetary System: A Synthesis," CEPR Discussion Papers 219, C.E.P.R. Discussion Papers.
    5. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
    6. Michele Fratianni & Juergen Hagen, 1992. "German dominance in the EMS:The empirical evidence," Open Economies Review, Springer, vol. 3(1), pages 127-128, February.
    7. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    8. De Grauwe, Paul, 1989. "Is the European Monetary System a DM-Zone?," CEPR Discussion Papers 297, C.E.P.R. Discussion Papers.
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    Cited by:
    1. Groeneveld, J.M. & Koedijk, C.G. & Kool, C.J.M., 1998. "Credibility of European economic convergence," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3108730, Tilburg University.
    2. Paul R. Bergin & Oscar Jorda, . "Monetary Policy Coordination: A New Empirical Approach," Department of Economics 01-02, California Davis - Department of Economics.
    3. John Thornton & Alicia García-Herrero, 1997. "Additional evidence on monetary base and interest rate linkages in the EMS," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 133(2), pages 359-368, 06.
    4. Paul Bergin & Oscar Jorda, 2001. "Measuring Monetary Policy Interdependence," Working Papers 69, University of California, Davis, Department of Economics.
    5. Hassapis, Christis & Pittis, Nikitas & Prodromidis, Kyprianos, 1999. "Unit roots and Granger causality in the EMS interest rates: the German Dominance Hypothesis revisited," Journal of International Money and Finance, Elsevier, vol. 18(1), pages 47-73, January.
    6. Devine, Máiréad, 1997. "The Cointegration of International Interest rates," Research Technical Papers 1/RT/97, Central Bank of Ireland.
    7. Fratzscher, Marcel, 2002. "The Euro bloc, the Dollar bloc and the Yen bloc: how much monetary policy independence can exchange rate flexibility buy in an interdependent world?," Working Paper Series 0154, European Central Bank.

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