British Interest Rate Convergence between the US and Europe: A Recursive Cointegration Analysis
AbstractThis paper addresses the question of the British state of convergence towards the Euro area, compared to the USA. Economically, the analysis is based on dependences in the money and capital markets, namely the uncovered interest parity (UIP) and the expectation hypothesis of the term structure (EHT). The econometric procedure consists of backward recursive calculations carried out in a cointegration framework. As the evidence for the single parities remains unconvincing, UIP and EHT are combined in a common model. Generally, the results are in favour of a growing British integration into the European Currency Union.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2006-005.
Length: 21 pages
Date of creation: Jan 2006
Date of revision:
Nominal Convergence; Cointegration; UIP; Term Structure; Euro Area;
Other versions of this item:
- Enzo Weber, 2006. "British Interest Rate Convergence Between The Us And Europe: A Recursive Cointegration Analysis," The IUP Journal of Monetary Economics, IUP Publications, IUP Publications, vol. 0(4), pages 29-47, November.
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-12 (All new papers)
- NEP-EEC-2006-02-12 (European Economics)
- NEP-FMK-2006-02-12 (Financial Markets)
- NEP-MAC-2006-02-12 (Macroeconomics)
- NEP-MON-2006-02-12 (Monetary Economics)
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