Convergence and Anchoring of Yield Curves in the Euro Area
AbstractWe study the convergence of European bond markets and the anchoring of inflation expectations in euro area countries using high-frequency bond yield data for France, Germany, Italy and Spain. We find that Economic and Monetary Union (EMU) has led to substantial convergence in euro area sovereign bond markets in terms of interest rate levels, unconditional daily fluctuations, and conditional responses to major macroeconomic data announcements. Our findings also suggest a substantial increase in the anchoring of long-term inflation expectations since EMU, particularly for Italy and Spain, which since monetary union have seen their long-term interest rates become much lower, much less volatile, and much better anchored in response to news. Finally, the reaction of far-ahead forward interest rates to macroeconomic announcements has converged substantially across euro area countries and even been eliminated over time, thus underlining not only market integration but also the credibility that financial markets attach to monetary policy in the euro area.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6456.
Date of creation: Sep 2007
Date of revision:
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- Michael Ehrmann & Marcel Fratzscher & Refet S Güürkaynak & Eric T Swanson, 2011. "Convergence and Anchoring of Yield Curves in the Euro Area," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 350-364, February.
- Ehrmann, Michael & Fratzscher, Marcel & Gürkaynak, Refet S. & Swanson, Eric, 2007. "Convergence and anchoring of yield curves in the euro area," Working Paper Series 0817, European Central Bank.
- Michael Ehrmann & Marcel Fratzscher & Refet S. Gürkaynak & Eric T. Swanson, 2007. "Convergence and anchoring of yield curves in the Euro area," Working Paper Series 2007-24, Federal Reserve Bank of San Francisco.
- Refet Gurkaynak & Marcel Fratzscher & Eric Swanson & Michael Ehrmann, 2009. "Convergence And Anchoring Of Yield Curves In The Euro Area," 2009 Meeting Papers 897, Society for Economic Dynamics.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-24 (All new papers)
- NEP-CBA-2007-09-24 (Central Banking)
- NEP-EEC-2007-09-24 (European Economics)
- NEP-MAC-2007-09-24 (Macroeconomics)
- NEP-MON-2007-09-24 (Monetary Economics)
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