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

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Author Info

  • Jakob de Haan
  • Tigran Poghosyan

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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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2007/wp-cesifo-2007-07/cesifo1_wp2060.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2060.

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

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Related research

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

References

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Citations

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Cited by:
  1. Nannette Lindenberg & Frank Westermann, 2009. "Common Trends and Common Cycles among Interest Rates of the G7-Countries," Working Papers 77, Institute of Empirical Economic Research.
  2. Mendonca, Gui Pedro, 2008. "Structural Breaks, Regime Change and Asymmetric Adjustment: A Short and Long Run Global Approach to the Output/Unemployment Dynamics," MPRA Paper 14648, University Library of Munich, Germany.

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