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Interest Rate Linkages in EMU Countries: A Rolling Threshold Vector Error-Correction Approach

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Author Info
Tigran Poghosyan ()
Jakob de Haan ()

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Abstract

This paper revisits financial market integration in the European Economic and Monetary Union, using a threshold vector error-correction model (TVECM) for a fixed rolling window. This approach enables us to analyze the dynamics of transaction costs and detect any co-movements with (policy induced) changes in the financial environment. The TVECM methodology is applied on interest rates from different financial markets (government bonds, deposits, loans and mortgages) in Germany, France, Italy, Belgium and the Netherlands for the 1980-2006 period. Our main finding is that only for some country pairs and financial market segments there is evidence in support of financial integration.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2060.

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Date of creation: 2007
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Handle: RePEc:ces:ceswps:_2060

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Related research
Keywords: interest rate linkages; financial integration; EMU; threshold vector error-correction;

Find related papers by JEL classification:
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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