Testing real interest parity in the European Monetary System
AbstractCurrent discussions on Economic and Monetary Union (EMU) in Europe have stressed the need for enhanced integration of goods and factor markets as a pre condition of moving as costlessly as possible to a single currency system. The real interest differential - and hence tests of real interest parity - provide a summary measure of the degree of residual integration necessary such that these conditions are met. Empirical tests suggest a rejection of real interest parity among European Monetary System (EMS) member countries, at least during recent years. Further, a decomposition of the differential suggests that imperfect integration of goods markets, as reflected in a failure of ex-ante PPP, is largely responsible for this finding.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Bank of England in its series Bank of England working papers with number 2.
Date of creation: Jul 1992
Date of revision:
Contact details of provider:
Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Web page: http://www.bankofengland.co.uk/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cumby, Robert E. & Mishkin, Frederic S., 1986.
"The international linkage of real interest rates: The European-US connection,"
Journal of International Money and Finance,
Elsevier, vol. 5(1), pages 5-23, March.
- Robert E. Cumby & Frederic S. Mishkin, 1987. "The International Linkage of Real Interest Rates: The European - U.S. Connection," NBER Working Papers 1423, National Bureau of Economic Research, Inc.
- Andrew G Haldane & Mahmood Pradhan, 1992. "Real interest parity, dynamic convergence and the European Monetary System," Bank of England working papers 1, Bank of England.
- Joe Peek and James A. Wilcox., 1982.
"The Postwar Stability of the Fisher Effect,"
Research Program in Finance Working Papers
129, University of California at Berkeley.
- Batchelor, R. A., 1986. "The psychophysics of inflation," Journal of Economic Psychology, Elsevier, vol. 7(3), pages 269-290, September.
- Eijffinger, S.C.W. & Lemmen, J.J.G., 1994. "The catching up of European money markets: The degree vs. the speed of integration," Discussion Paper 1994-66, Tilburg University, Center for Economic Research.
- Darren Pain & Ryland Thomas, 1997. "Real Interest Rate Linkages: Testing for Common Trends and Cycles," Bank of England working papers 65, Bank of England.
- Mariam Camarero & Cecilio Tamarit, 1996. "Cointegration and the PPP and the UIP hypotheses: An application to the Spanish integration in the EC," Open Economies Review, Springer, vol. 7(1), pages 61-76, January.
- Lemmen, J.J.G. & Eijffinger, S.C.W., 1996.
"The Price Approach to Financial Integration: Decomposing European Money Market Interest Rate Differentials,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-73026, Tilburg University.
- Lemmen, J.J.G. & Eijffinger, S.C.W., 1994. "The price approach to financial integration: Decomposing European money market interest rate differentials," Discussion Paper 1994-16, Tilburg University, Center for Economic Research.
- Holmes, Mark J. & Maghrebi, Nabil, 2008. "Is there a connection between monetary unification and real economic integration? Evidence from regime-switching stationarity tests," Journal of International Money and Finance, Elsevier, vol. 27(6), pages 958-970, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publications Team).
If references are entirely missing, you can add them using this form.